To run a profitable business, mastering the art of selling your good or services at the right price is crucial. There are multiple methodologies and models often associated with achieving this very goal, including the three thirds framework or the 40-40-20 rule.

In an evolving and increasingly competitive marketplace, keeping your pricing competitive to attract your target audience, and indeed to retain your existing client base is a tightrope that many business owners find themselves walking today, particularly those that have faced an increase in their VAT rate recently.

Ensuring cost-effective delivery of products or services also demands expertise in operations and a requirement to analyse every financial aspect of the business in much greater detail than simply reviewing previous accounts that are no longer relevant.

Asking yourself and your team questions around employee productivity, efficiency, and fair compensation become paramount. Managing people effectively, motivating them, and maintaining impeccable records are daily and sometimes even monotonous responsibilities, but don’t underestimate them, they can make or break profitability.

Our team of experts give some of their tips on how to achieve profitability below.

Shaking the Bad Year/Good Year fallacy.

There is quite a popular saying in the world of accounting and beyond, “men lie, women lie, numbers don’t” and it is extremely relevant.

Contrary to past trends where startups accepted initial losses for market share, today's successful businesses prioritise early profitability. Making money from the start and growing at a profit is not only the safer and more sustainable path. If you find yourself in the position as a business owner or founder looking for external investment, we’ll give you a hint - the business prioritising profitability over market share is the business that walks away happiest.

If you aren’t a start-up business, it is becoming increasingly important not to let yourself fall into the trap of accepting less profits. Profits should increase to align and match the growth of your business, or the increased level of expertise you have acquired.

In a profitability-focused approach, there is simply no room for the concept of good or bad years.

A recession or a dip in demand through a slower market should not automatically translate to financial losses for you the business owner, or the business.

A well-designed business model allows for flexibility, enabling adjustments without sacrificing profitability percentages. It isn’t always easy to arrive at that percentage given the increase in costs and constant change, but it certainly isn’t impossible, particularly not with the right accountancy partner supporting you.

Deserving Profit: A Shift in Mindset

Many business owners often grapple with the idea of deserving a profit.

Crazy to think when you consider the risks, challenges, and stress we take as business owners. Where there is absence of substantial benefits like pensions or healthcare packages, not to mention job security, profitability becomes paramount.

The belief that a decent salary suffices often leads business owners to put themselves second when it comes to financial priorities and is the type of mindset that needs a fundamental shift. If you're creating value and employment opportunities, be it 2 jobs, or 200, you deserve to be rewarded and so do your yearly accounts!

Profit shouldn’t feel like a dirty secret but should instead be recognised and thought of as a validation of your efforts.

If it feels unachievable or unrealistic to have that shift in mindset, it's time to get in touch.

Is it time to change how we view and treat profit?

Parkinson's law proves that work expands to fill the available time.

By prioritising profit upfront, the chances of expenses absorbing it decrease.

To provide a somewhat exaggerated perspective, imagine where profit is immediately set aside in a separate account, the spotlight on expenses soon brightens when putting profit at the forefront.

Mike Michalowicz provided the same perspective in his book, "Profit First." Michalowicz suggests that instead of viewing profit as what's left after all expenses, successful business owners make profit the priority.

An exercise to implement yourself is to challenge yourself to think differently. Every time money flows into your business, allocate your target profit percentage before covering costs.

This challenges the traditional approach of waiting to see what's left at the end of the year and proposes a proactive method to ensure your profitability target is delivered.

While this might not be the only way to focus on profitability, it sparks a crucial conversation about how business owners can actively shape and prioritise profit in their forecasts and allows for more optimistic plans for the future.

Don’t sacrifice yourself!

Profit is not just necessary; it's a worthy goal from day one and remains that way.

Whilst achieving consistent profitability may take time, skill development, processes, and efficiencies, it is crucial not to sacrifice your own salary in the process.

Pay yourself a fair market rate and consider profit as an essential addition.

In the intricate world of business, profitability is not just a measure of success; it's a testament to your expertise, dedication, and the value you bring to the market.

If you feel like your business is not achieving the level of profit that it should be, reach out to our team by emailing info@borgo.ie to arrange a free consultation with our team and discuss whether Borgo is the partner to help you get there.