Are You Making Money, Or Are You Just Selling?
Unless you’re running a non-profit organization, the primary aim of starting a business is to provide a solution and earn profit. Even for non-profits, founders apply for funding for projects to prevent continuously taking money out of their pockets and becoming charity problems themselves.
So, are you making money, or are you just selling? Here is what I mean by that. In the early stages of a business, business owners make lots of investments. These investments include money, time, energy, and ideas. In fact, at the onset, you barely get any sleep. You are putting all hours in to ensure the business grows, revenue starts streaming in, and you can bring other hands-on board. Without documentation, you could lose track of expenses and start making losses without knowing.
How do you ensure that you are not only selling but making a profit? Let me take you through a few points you need to consider.
Right from the moment you conceive an idea for a business, you must begin to document every little detail. And I do not mean just writing things down. It has to be structured in a way that, in your absence, anybody can be able to understand.
One option will be to use notebooks and label them precisely for their intended information. You could develop codes for different segments of your business, such as market research, inventory, etc. And in these, you need to carefully add the date and title of every piece of information you enter.
You can use color codes for data that fall into the same categories for easy identification and differentiation. Create folders for all your business papers, which include letters, receipts, cards, and certificates, and label them accordingly.
There are risks to hardcopy documents. There could be a flood, a fire, or termites-yes termites. They also take up a lot of space over time. So you can imagine piling up documents for five years!
If you do not want to have to deal with creating space for hard copy documents or risk losing them to natural disasters and dreadful insects, you may want to store them on your computer.
Create one big folder for your business and name it as such. Then create subfolders for different categories of data and make sure to enter data where they belong. To access your documents anywhere on any device, you could use google drive to synchronize them.
Even with a computer, you risk losing data. An ideal option will be to do both.
The great thing about documentation is that it helps you make informed decisions for your business. With all your transactions recorded, you can calculate the revenue and track how much profit you have made from sales. Based on that information, you will be able to determine the growth of your business and which strategies have been the most effective in that regard.
2. Set financial goals
Now let’s narrow it down to the part where you need to make a profit, not just sales.
For every penny spent, you will need to contemplate how its use and how to regain it. That is why you need to record those expenses. Record the amount and the purpose for its use. Do not underestimate anything because every penny spent matters.
If you do not account for the monies spent on building your business, you will not be able to tell if you are making profits or not. You would be running a charity and even that at a loss. One thing that can help you intentionally generate revenue is to set goals.
Set a target for your business. For example, to achieve 50,000 Naira in revenue at the end of the first half of 2022. With a target in sight, you employ diligence in recording your expenses, acquiring them back, and even more. Start small and gradually go big. And be sure that your goals are realistic and achievable based on data you have gathered about your business over time and your target market.
3. Be financially disciplined
The first set of revenue needs to go back into paying back expenses. If you took loans or used your savings to expand the business, make profits allocation towards paying back. Allocate a percentage for maintenance, tax, and reinvestments. You may create a “non-spendable” account for a portion of the profit. If you do not necessarily need to pay yourself from the onset, don’t. Or better still, pay yourself a small percentage.
Bottom line, do not spend monies that you shouldn’t be spending. Sometimes people spend the revenue generated on personal needs and later have to borrow money from elsewhere to invest in the business again. That is very unhealthy. Don’t do that. It doesn’t help you grow; it doesn’t help your business grow.
In conclusion, don’t just spend hours and hours running a business. Don’t just keep pouring into a business. Be sure that those investments would yield something.