Understanding Your Profitability
One of the most important parts of the growth process is to really understand the true metrics and drivers of your business from an operational and financial perspective. Here are some questions to ask yourself if you are trying to grow.
Where are you investing your money or time most?
Some kinds of work also require you to invest more, in insurance or recruiting, for example. Knowing where your money is going and the ROI will help you focus on what matters.
Where is your net margin coming from?
You need to understand where your margin is coming from, across all your different lines of business or regions. Is there a sector where you are killing it, or one where you are spending time but shouldn’t be? In order to grow, you need to know that.
How are you pricing your services?
When you price your services, do you compare to market rates and understand all the true costs that are involved in working with your clients? To help, we developed a profitability calculator on our website for any staffing firm to utilize when pricing out a deal on the spot or back in the office.
Do you understand what your financial documents are telling you?
Your balance sheet and income statement are two good starting points. If you don’t understand what you’re looking at, learn more about it.
DO THIS
• Have a budget • Revise and update your budget or forecast • Review your margins and ways to increase • Look at refinancing expensive debt • Explore other revenue opportunities
NOT THIS
• Pocket money and not reinvest in the business • Lose control of your expenses • Live beyond your means • Add any new debt without good reason