Revenue Going Up but Profit Staying Flat – Our 3 Fixes

Controlling your business’s revenue is key, and it is something that has to be fixed before it is too late. In fact, the Small Business Credit Survey (SBCS) found that 57% of small business had profit growth in 2019, but even though revenue was up, there was a ZERO percent change in those reporting a profit. See what caused this and some insights on how to fix it, especially if you are hoping to expand your business in the future

Your business is doing well. But what’s next? ProStrategix knows how to help. Read some of our other articles below, or feel free to connect with us and get a complimentary thirty-minute consulting session.

The Statistics for Revenue and Profit

Nearly 6 out of 10 small businesses saw increased revenue, and a third of them added people to their payrolls. Young people and young companies saw the greatest growth. Finally, around 3 out of every 4 owners reported cost increases in the past year. So what can be done about this to fix revenue? And how can you hope to grow your business if you can barely make it maintainable in the present?

The Issues Holding Back Profit

Labor cost

3 out 4 respondents reported labor cost increases in the past year. With the new regulations on minimum wage and overtime rules, this trend is likely to accelerate in 2020. If it is hard to attract and retain talent, how can you afford employees?

Access to and cost of capital

A little of 4 out of every 10 surveyed reported needing capital for their companies. More than half of them sought funding due to a financial short fall, which is the worst time to seek capital, as you are likely to have to pay increase interest due to your financial position

Fixes for Your Business Revenue

1. Increasing prices to cover at least some of the costs.

About half of the companies that experienced cost increases, raised prices to cover the increased cost. These firms were twice as likely to see profitability growth than those who did not raise price (SBCS report). With low inflation, it may not be possible to pass along costs, but there may be a way to reduce the amount of product for same price. For example, smaller serving sizes at restaurants.

2. Increasing efficiencies

Here’s a place where you may have your best chance. Are there any labor-intensive processes that could be automated or delegated to other people? If so, this is the area where you might want to focus so that you can cut the labor time and thereby cost. 

3. Access to better capital

If you expect to need cash for operating expenses, investment, or to cover a short fall, it’s best to seek that capital before you need it. We have a whole set of posts dealing with these issues of getting capital and loans. Depending on your specific case, you may want to check them out. If you wait until a crisis hits, the likelihood of you getting the amount you need goes down dramatically. Finally, make sure your personal credit is above 680, better if its 700. Poor credit history is one of the major stumbling block to accessing affordable capital.

Fixing Your Business Revenue Is Necessary

We often talk about the need to grow your business to succeed for the future. But possibly more important than that is surviving on a day-to-day basis. If you are worried about your business revenue, that’s understandable! But we are here to help. 

At ProStrategix, we know you have concerns.  We’re designed to help give you the business support you need so you can focus on doing what you love.  If you would like to learn about how we might be able to help you, please contact us.

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