For Small Business Owners & the Self-Employed

Insider Secret:

3 Ways To Boost Profits and Cash Flow....NOW!

Having a lot of sales is great, but unless you're doing everything you can to maximize profits and cash flow, you could be selling yourself short.

by Alex Goumakos, CPA


No business can survive for long without generating a profit. That is a fundamental law of capitalism.  Unless you’re starting a new business or launching a new product or service, consistent and unanticipated losses will ultimately lead to failure.

But even profits themselves should be looked at and analyzed to see if you're getting the most out of your hard work. The sad truth is, many smaller business owners don't take a wholehearted and honest look at their profits. As a result, they shortchange themselves by not maximizing the rewards they're entitled to. In effect, these owners are "giving away the store."

Conventional wisdom says that to succeed in business, you must generate profits. I say conventional wisdom isn't good enough. In order to be highly successful, you need to maximize your profits and ensure that you have a steady flow of cash.

Keep in mind that even profitable companies oftentimes go out of business. Because of the quirky differences in financial reporting, its entirely possible for a company to show a paper profit, when in reality it has a cash flow loss. When analyzing profit, be sure to keep an eye on cash flow as well!

If you want to maximize and impact profits and cash flow immediately, focus on the following three things:  

1. The Prices You Charge

The quickest and easiest way to boost your company’s cash flow and profit is to adjust your pricing structure.  This is accomplished in one of two ways: either by raising the price of your products or services or by strategically lowering them. 

Of course, which method is best for you, depends on numerous factors such as what you sell and what type of market you sell it in.

Raising prices can be a touchy issue and a smaller business owner must weigh the pros and cons of such a strategy. 

However, I know from experience that many smaller businesses and self-employed individuals (especially new business owners) UNDERCHARGE as a general rule. 

In fact, some small business people feel that in order to stimulate demand, they must reduce prices even more. What a mistake this philosophy is!  These business owners play a game that is extremely difficult to win.

Lowering price can be an effective strategy, no doubt, but for many smaller businesses, it remains a double-edged sword.  If not done correctly, lowering prices can actually make you work harder for less money.

This is because a small reduction in price will cause a significantly disproportionate reduction in profits. 

For instance, a business that cuts prices by 10% could have a much LARGER percentage DECREASE in total profits: by as much as 40%!  What this means is that in order to generate the SAME amount of profit as before you’ll need to increase volume. 

Using our example, you’d have to increase volume by a whopping 67% just to make the same amount of profit!  This is all well and good only if you’re in a position to accommodate the additional volume required. 

However, many smaller businesses lose out (big time!) because the additional volume they generate is NOT profitable.   

Unless you know the numbers and are prepared to accommodate the additional volume, don’t randomly lower prices.  You will lose before you even get started.  A better approach is to combine a small, incremental price increase with an increase in perceived value. 

Many gold mine businesses will accompany a price increase with an additional product, feature, or service that costs nearly nothing to produce and deliver. 

For example, one auto repair shop I know followed up a price increase with free transportation service.  If you took your car in for service and needed a ride to or from your work or home, the company would provide you with a free ride.  Customers did not mind the incremental price increase because they perceived an increase in the value of the service due to the transportation service.

You should review your pricing structure on a regular basis.  If you’re not doing so, you could be selling yourself short by losing out on additional profits.  But before you make any decision to raise or lower prices, make sure you understand exactly what the effects on your bottom line will be.

In my guide, Gold Mine Tactics: The Business Owner's Success Manual I discuss several potent and effective strategies for setting the correct price. The fact is, while some businesses do become successful because of their low prices, most gold mine enterprises charge more than their competitors do.

For more information on the Gold Mine Tactics success manual, click here.

2. Cost Control

The second way a business can increase profits is by proactively reducing its costs.  This might seem like common sense, but it’s amazing how many smaller business owners DON’T have an effective cost control strategy.  Cutting costs means reducing ALL cash outlays of the business, not just expenses. 

Also, many smaller business owners and self employed individuals think that they've already done everything they can to reduce their costs. This is an incorrect assumption because cost control is not only an action but a continual process. It requires nothing less than constant vigilance during good economic times as well as bad ones. 

Don't believe that just because you cut costs six months ago, that you can’t cut them again.  You absolutely can and the fact is, this is exactly the mindset gold mine business owners have.

There are many ways to reduce and control costs.  I prefer the following two methods because of their simplicity and effectiveness:

1. Comparison by Dollar Amount - This method is pretty straightforward and it involves simply comparing the dollar amount of certain expenses over a relative period of time.

2. Percent of Sales Analysis - With this method each account on your income statement is expressed as a percentage of sales. In other words, sales will always be 100% and everything else will be a percentage of it.

Incidentally, in Gold Mine Tactics: The Business Owner's Success Manual I discuss these two methods in much more detail and I show exactly how you can use them to dramatically slash your costs and expenses.   In addition, I present numerous straightforward and easy-to-implement tactics to control everyday costs. To learn more, click here.

3. Internal Systems and Processes

Finally, another way to boost profits and cash flow is to improve your company's internal processes and systems.  Every business has a set of internal processes and systems that it uses to perform its various tasks and functions.  Some of these include accounting and finance, production and delivery and sales and marketing.

Many times, smaller businesses have internal processes that either duplicate efforts or cause major inefficiencies. 

For example, I know too many small businesses and self-employed individuals that continue to write checks manually even though they have a computerized accounting system.  This process is a duplication of effort and it leads to decreased productivity. You may consider inputting checks as an inconsequential issue, but the fact is, business owners only have so much time to start with. As a result, they need to focus exclusively on high quality uses of their time.

Activities like this and others like it are highly inefficient and draw valuable time away from important things like picking up new business or concentrating on production.  

In addition, inefficient systems squander resources such as labor and cash.

Wasted time is absolutely wasted money. But since business owners don't actually write a check for their lost time, it's a financial drain that hardly gets noticed.

In my success manual, I cover specific systems and processes to improve. In addition, I show powerful, professional-strength strategies you can use in order to fine-tune your entire operation and ensure that you generate the most profits and cash flow that you can. To learn more, click here.

From my experience, I know that most business owners could improve their bottom line results substantially simply by implementing the strategies, I've discussed in this article.

Remember, to increase your profits and cash flow quickly, focus on the prices you charge, your costs and your company's internal processes and systems.