Planning a Profitable Business For Dummies

Veechi Curtis

• Publisher: For Dummies
• Year: 2021
• ISBN:
  9780730384823
• Edition: 1
• Topic: Business
• Subtopic: Small Business
• Index: Business

You don't need to be a'numbers person'tomake your businessprofitable! With Planning a Profitable BusinessFor Dummies, discover the secrets offinancial successand how to generateabove-averageprofits.

Written especially for the Australian audience, Planning a Profitable BusinessForDummies explainshow to build a business with profit in mind, using smart pricing techniquesand clear-eyed strategic planning. Whether you're just getting started in business orstillrecovering from lockdown losses, this bookpoints to where extra profits might lie.

Flip through these pages to learnthe importance of competitive positioning, smart pricing, and how best tosecure an enduringadvantageover your competitors.Reflect on how youcantransition to becomingan entrepreneur, rather than just a business owner, andwhy this distinction is so important.

• Make a safe-and-sound transition into working for yourself byusingproven businessstrategies
• Discoverthe fundamentals of financial projections, margins, and ratios—even if you aren't amathwhiz
• Securefinance for your business andmanageyour working capital wisely
• Identifysavvyexpense-saving ideas, and, when the time is right, sellyour business forthe highest price

Business owners need straightforward, practicaltipsthat ensure that extra edge of profitability.Findthese tipsinside Planning a Profitable Business For Dummies, andpaveyour pathto financial success.

Chapter 1

Building a Business with Profit in Mind

IN THIS CHAPTER

Finding your inner entrepreneur

Discovering the secrets for profit

Balancing dreams with just a pinch of reality

Taking the time to time it right

Developing a financial plan

When I talk to people about their business and hopes for the future, I’m aware that I’m in a unique position. Listening to anybody’s dreams is a privilege, but even more so when people share their doubts and hopes about this significant part of their lives.

People often ask me for help modelling the financials to support their business idea. They feel that it’s the financial plan, and this plan alone, which will reveal the secret of how to make a profit.

Financial plans are crucial to profitability, that’s for sure. However, just as important is establishing what you’re going to do differently in your business, how you’re going to take advantage of this difference, and whether this difference will be something that customers really want.

In this chapter, I touch on all these aspects, as well as the importance of knowing how to temper ambition with realism to keep your expectations grounded, and how to manage the level of risk that any new venture entails.

Shifting to an Entrepreneur Mindset

For almost all businesses, in order to build something that’s truly profitable, you need to create a business where employees — rather than yourself — are the ones doing most of the work.

If you look around you, most medium-sized businesses fall into this category. For example:

• My local plumbing company has a team of plumbers, each with their own van and apprentice. The owner occasionally helps with tricky jobs, but mostly focuses on management and marketing.
• The place where my son used to learn piano is a music school, with lots of different tutors teaching different instruments. The owners teach sometimes, but rely on a team of teachers to deliver most of the lessons.
• A girlfriend of mine has a business selling baby sleeping bags. She no longer stitches each sleeping bag herself. Instead, she still manages the design, marketing and distribution, but has shifted production offshore.
• My neighbour runs a small chain of three cafes. He rarely cooks or serves tables any more, but focuses on the finances and management.

Can you see that for each of these examples, the owners have made a leap in how they think of their businesses? The plumber is now the manager of a plumbing services company; the music tutors started their own music school; the barista opened a chain of cafes; the seamstress runs a manufacturing company. In all of these examples, the owners no longer unblock pipes, teach violin, serve coffees or stitch fabric. In return, the potential for each of these businesses is that the owners can have more freedom and earn more money than they otherwise would have done.

For me, this transition from owner to entrepreneur is really exciting. Such freedom provides an opportunity to do other things in life that have only been dreams up until now.

If you haven’t made this transition, and your business is still dependent on you for pretty much every cent of income, my question to you is this: Have you ever consciously made the decision not to be entrepreneurial? Or have you never really let yourself imagine how you could do things differently?

If your answer is ‘yes’ to the latter, do try to give the visionary in you some room to breathe. Spend time thinking about how you can grow your business and create something that has a life of its own. Chapters 2 and 3 may help develop your thinking in this way.

Finding the Secret to Profit

Businesses fall into three broad categories:

• The first type of business is one that has been done before, and therefore has been tried and tested. I call this a traditional business.
• The second type of business is one that finds its own niche, thereby doing something especially tailored to a small group of customers. I call this a niche business.
• The third type of business is one that launches an entirely new concept on the world. I call this an entrepreneur business.

Each category of business has its own secret to profitability, which I explain in the next sections of this chapter.

Expressing your difference in a traditional business

The most common kind of business (and probably the safest and most reliable) is a traditional business. Most retailers and many service businesses fall into this category — for example, bookshops, builders, electricians, florists, hairdressers or software engineers.

While traditional businesses were a safe bet in times gone by, changing technology means that many of these business models are now relatively precarious. For example, bookshops used to offer solid profits, so long as you selected a good location and knew your trade. However, the changes brought about by ebooks and online distribution mean that, nowadays, running a bookshop is a very different proposition indeed. Similarly, a bookkeeping business may have been a steady income stream in the past, but cloud technology and new accounting software solutions are rendering many traditional bookkeeping services obsolete.

In my experience, the secret to profitability with a traditional kind of business depends on your ongoing capacity to differentiate yourself from your competitors. If possible, this difference should capitalise on your skills and resources, so that this difference is hard for competitors to imitate.

Here are some examples of businesses working in this way:

• A regional bookshop acts not just as a retail store, but doubles as a quasi-community centre, with morning teas, book clubs and regular author readings.
• A guitar teacher livestreams a performance of his original music each month, selling charts for these compositions, promoting his online lessons and attracting regular donations via Patreon.
• A vet provides a 24-hour mobile service to people’s homes.
• A cabinet maker mills his own wood on his 30-acre property on the South Coast of NSW, using this timber for his custom-built high-end furniture.
• In addition to regular services, a mechanic offers monthly do-it-yourself classes where she teaches customers how to do basic maintenance on their own vehicles.

I talk much more about differentiating yourself from your competitors, and identifying your strategic advantage, in Chapter 2.

Marketing to a niche

A niche business creates something specialised and caters to a narrow but (hopefully) dedicated market. A niche business can cover anything from manufacturing custom guitars to producing hand-stitched silk lingerie, or from designing permaculture gardens to cooking special food for diabetics.

The best thing about niche businesses is that they can operate on a small scale. Running a micro business typically means lower risk, less expense setting up and an opportunity to try out new ideas and test the response.

I’ve worked with many owners of niche businesses and, in my experience, the secret to profitability lies in the strength of your marketing skills and strategies.

One of the huge changes in business in the last couple of decades is the way that advertising is becoming increasingly specific. Just 20 years ago, people were stuck with newspaper advertising, hoping that out of the 80,000 people reading the paper, maybe three people would be interested. Now, you can create marketing campaigns on social media that define who will see your ad based on their age, where they live, what their interests are, and much more. You may only reach 800 people with your advertising, but if your message is specific enough, chances are you’ll still get at least three responses.

With these highly specific marketing...

Table of contents

• Cover
• Title Page
• Table of Contents
• Introduction
• Chapter 1: Building a Business with Profit in Mind
• Chapter 2: Finding Your Competitive Edge
• Chapter 3: Staying One Step Ahead
• Chapter 4: Guarding Your Working Capital
• Chapter 5: Pricing for Profits
• Chapter 6: Setting Sales Targets With Profit in Mind
• Chapter 7: Modelling Business Scenarios
• Chapter 8: Making Magic with Margins
• Chapter 9: Using Reports to Boost Your Profits
• Chapter 10: Ten (Almost!) Tips for Improving Your Bottom Line
• Chapter 11: Ten Tips for Selling Your Business
• Index
• About the Author
• Connect with Dummies
• End User License Agreement