How to Improve Your Net Profit

Improving your business's profits is not an easy task. It would be a lie to state that there exists a "quick fix" that will make your company profitable or will increase your company's profits overnight. However, some traditional ideas of how to increase your company's profitability still hold true. In essence, there are only two ways to make your company more profitable: (1) increase your revenue while creating a justifiable increase in your costs; or (2) decreasing your costs.

By far, the easier of the two options to implement is to decrease your costs. Decreasing your costs can be as simple as laying off workers, discontinuing a product or a particular product line, reducing your advertising efforts, and/or any and all of these options. However, even though these options will reduce your costs, you have to be aware that other problems arise when you implement any of these cost cutting measures. A lay-off of workers, for example, can lead to a negative community image of your company. Additionally, should you need to rehire skilled workers in the future, such workers may be hard to find or such workers may be apprehensive about working for your company.

Additionally, discontinuing a product or a particular product line and decreasing your advertising efforts may cause reduced revenue. Granted, the cost savings may more than make up for the decreased revenue, but the fact that revenue will be reduced still needs to be taken into account when determining the financial strength of your company.

As is shown above, reducing costs is easier to do because it does not require customer support to implement. You can unilaterally reduce your workforce, product line, and your advertising budget without customers' help. Raising revenue, however, is a different story. Raising your revenue generally means that you need to increase your sales. As such, customer support is needed.

The key is not simply to raise revenue. Raising revenues in and of itself is not a difficult task. The key is to raise revenues will keeping costs the same or by keeping costs at a justifiable level. In other words, it is easy to spend $1 million to increase a business's revenue by $100,000, but obviously, this is not a sustainable business model. If, however, you increase your costs by $100,000 and by doing so increase your revenue by $1 million, then that increased $100,000 cost is justifiably because your company is more profitable.

There is no "cookie-cutter" answer on how to increase a business's revenue while keeping any increased cost justifiable. Every business has a unique situation and thus, needs to be analyzed by its particular situation. However, once a proper analysis is completed, you will be able to implement revenue raising measures that can increase your company's profitability.

Legal Considerations for Entrepreneurs When Starting a Business

Entrepreneurs will face many hurdles when starting a new venture and/or business. Many will be tempted to plow right into the matter without first researching laws and regulations regarding their particular business.

I am going to let you in on a little secret, many entrepreneurs are dead before they even make their first sale! Why, you may ask? These entrepreneurs are in trouble because they made the classic mistake of not seeking the help of professionals. If you, as an entrepreneur, have the requisite knowledge of the law to begin and maintain your venture and/or business without fear of having done something inconsistent with the law, then you should be fine. However, most new entrepreneurs will just start a business without thinking of the ramifications of a bad contract, a badly negotiated lease, failure to properly incorporate and or organize, and/or failure to obtain financial assistance (whether it an accountant, financial advisor, bank, etc.), to name a few.

The most popular excuse used by entrepreneurs is that lawyers and accountants cost too much. Using this line of thinking, these people try to handle complex legal and financial matters for themselves and, most of the time, end up with a problem that will cost more to fix than it would have originally cost to avoid the problem. These types of entrepreneurs practice “stepping over dollars to pick up dimes.” I suggest you not be one of these entrepreneurs.

Do not fall into a legal and/or financial pit that could have been easily avoided. Starting a business is not as easy as opening the doors to your shop. There exists many state and federal considerations (whether they are taxes, permits, licenses, incorporation or organization or registration, proper accounting, employee matters, and/or stock issues, to name a few) an entrepreneur needs to consider before “starting a business.” Do not ruin your business before it starts by avoiding proper legal and financial assistance.

Need More Money? Try Cutting Your Costs!

I had a unique experience yesterday afternoon. I was talking to a friend that was having trouble paying his bills. He was wondering how he was going to make next months rent payment (he lives in Los Angeles and thus his rent is very expensive), his car payment, his student loan payments, and all his other bills. He kept wondering and asking me how to make more money.

During our long conversation, I was amazed that he was considering getting a second job (considering he already worked 60 hours a week). What amazed me further is that he never considered cutting costs. His entire motivation was about making more money.

First, let me start that making more money is a great goal. The entire purpose behind this blog is to share knowledge on how to acquire wealth. However, wealth accumulation can be a long process. Absent hitting the lottery, millions of dollars do not come overnight. It takes hard work, dedication, and motivation.

Most people in my friend’s situation think one dimensionally. The problem presented in paying bills. They think “I do not have enough money to pay bills, therefore, I need to make more money!” This way of thinking is not incorrect, but it can create many problems in the immediate future. Let us say that my friend got a second job on his days off. I guarantee in a month, he would have no energy and his primary job performance would suffer, as well as his health and personal life.

An easier way exists. I told him he needed to cut costs. Cutting costs will have an immediate effect. I told him to stop going out to eat so much (he went about three times a week), brown bag lunch at the office, and stop buying unnecessary stuff. Additionally, I told him to contact his student loan office and ask for a month reprieve. I think that most student loan providers allow the payee to request a “month off” without penalty. Taking a month off will put him a month ahead on his student loan payment.

There are many other little costs he can cut that will add up big in the long run. My biggest piece of advice for him was to NOT form a budget. Budgets are too hard and people never stick with them. All I said was to keep track of the costs that you eliminated. This way, he will be able to see a noticeable difference in his checking account, and most importantly, he may not have to pick up a second job!