IMPORTANT! A profitable business isn’t just about revenue!
It’s about managing expenses wisely, increasing efficiency, and ensuring that every dollar spent is required. Here are some actionable strategies to help you fine-tune your finances and prepare for a stronger, more sustainable 2025…
Audit Your Expenses
Take a hard look at your spending. Be ruthless but strategic—cut out expenses that aren’t essential to your business’s efficiency or revenue generation, but don’t sacrifice tools or services that make you money. For example, if you’re paying for five different software subscriptions, ask yourself: Are all of them necessary, or can one platform handle multiple tasks?
Embrace Automation
Assess tasks currently handled by staff or taking up your time that could be automated. From invoicing to customer follow-ups, automation tools can save time and reduce staffing costs while maintaining accuracy. At Freshwater, we are pros at helping identify areas where automation could improve your business efficiency. We assess your business’s financial health, uncover inefficiencies, and provide strategies to maximise profitability.
Learn Your Numbers
Key financial metrics reflect the health of your business. Our monthly reports offer insights into various aspects of your business, including Gross Profit Margin, Net Profit Margin, and Cash Flow.
- Gross Profit Margin: This indicates how much of your revenue is left after covering the direct cost of goods sold. A higher margin means your pricing strategy and cost management are on point.
- Net Profit Margin: This shows what’s left after all expenses. If it’s low, you should question your operational efficiency.
- Cash Flow: Tracks how money flows in and out of your business. Negative cash flow might mean spending more than you earn—which is dangerous for growth.
If you don’t understand these metrics—or worse, aren’t reviewing them monthly or find them all too boring—now’s the time to reach out. We’ll ensure you receive these reports and understand how to interpret them for actionable results. We promise you’ll feel excited and empowered by understanding precisely what is happening with your business, why, and where you’re headed next.
Build a Buffer
Financial stability comes from creating a buffer. Start small—allocate 1% of every sale to a profit account. Over time, increase this amount. If you can operate your business at 100% of its current income, you can function just as well at 99%, and this small change builds the foundation for long-term profit. Equally important, ensure you allocate a % of every sale to your tax, GST, staff wages/contractors, your wage, and anticipated costs. If you’re not doing this / don’t have a system – you’re doing it all wrong. Unless you’re in the tiny % of business that skyrocket in turnover and net profit, odds are you’re on a slippery slope and setting yourself up for a cash flow crisis. Pay yourself – pay yourself property and FIRST – before you pay for anything else. You deserve compensation for your hard work and the risk you’re taking by running a business, so pay yourself first – and force the rest to work. When you approach your finances this way, you’ll be surprised to see how your mindset shifts and how far you can get ahead financially.
Create and Review Your Budget
Your budget is your blueprint, and you should review it AT LEAST quarterly. If you aren’t reviewing it, ask yourself why. Budgeting isn’t a one-and-done task; it’s a dynamic process that evolves with your business. This doesn’t have to be overwhelming; just open your Freshwater Monthly P&L and look at your numbers. “Yikes, I’m spending that much on subscriptions – why?” “Gosh, for every dollar of sales, I need to spend 55% – that’s just too high; how can I fix this?” etc. You’ll be amazed at what you can uncover and how easy it is to interpret your numbers and make a plan.
AVOID the “Survival Trap”
It’s a common misconception among business owners to believe that increasing sales will resolve financial challenges. This mindset can lead to the ‘Survival Trap,’ where immediate issues are addressed without a strategic plan, creating a cycle of short-term fixes that hinder long-term growth.
Relying solely on boosting sales overlooks the importance of profitability and efficient cash flow management. Higher sales can result in increased expenses without a solid financial foundation, leaving the business in a perpetual state of financial strain. To break free from this cycle, it’s crucial to implement a structured economic system that prioritises profit. The ‘Profit First’ methodology suggests allocating a percentage of every sale to profit, taxes, and operating expenses, ensuring that profitability is built into your business model.
By focusing on profitability and efficient cash flow management, you can establish a stable financial base, allowing your business to thrive without the constant pressure of chasing sales to cover expenses.
Freshwater Business Coaching
At Freshwater Taxation, our quarterly reviews go beyond just numbers. We:
- Evaluate your financial metrics: Highlight areas of strength and those that need improvement.
- Identify inefficiencies: Suggest cost-saving strategies, including automation and more intelligent systems.
- Plan for profitability: Help you allocate income in line with “Profit First” principles.
- Guide your decision-making: Equip you with the knowledge to interpret your monthly reports effectively.
Your business should work for you—not the other way around!
If you’re not generating profits and serving your goals, it’s time to make changes. With a leaner, more innovative financial plan, you can focus on building a profitable and sustainable business for 2025 and beyond.
