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How to Tell If Your Business Is Profitable Both In Dollars and Quality of Life

February 20, 2012 | Comments: 0 | Views: 176

As a business owner, you have worked really hard to open and keep open your business. People evaluate success in different ways but having a successful for profit business depends on having more income than expenses over the long run at the very least. You should also be able to enjoy life away from work without having to work 80-hour work weeks for the rest of your life so quality of life is also something that should be taken into account when taking into account profitability (i.e. being able to pay yourself). You should ask yourself the following questions to measure the profitability of your business in both terms of dollars and cents and in quality of life:

How Do You Compare To Your Competitors?

There is always someone trying to take your clients. You need to be conscious of what is going on in your market and rivals to make sure that you offer the best products or solutions to your clients. This can be carried out by regularly identifying how you compare against your rivals in the areas of market share, sales growth, client growth and marketing response rates. Marketing response rates should be reviewed by each advertising type such as monthly website visitors, pay-per-click marketing, magazines ads and other kinds of marketing.

Are You Able to Pay Your Bills?

This should be a simple computation if you have the right techniques and procedures in position. You should not have to depend on your accounting firm to tell you if you are profitable. You need to have something in place that tells you throughout the month how you are doing such as a business dashboard that tracks the most important drivers of your business. This dashboard will allow you to quickly make adjustments to your business if needed to improve business results.

If you are not successful or are not reaching your earnings objectives, then you should (1) evaluate current operations and find ways to make them more profitable by making your back office more efficient and less expensive, (2) evaluate all costs and remove needless ones or find less costly choices such as switching insurance carriers or telephone providers and (3) create new income sources or increase number of clients through new marketing initiatives.

Are You Able to Perfectly Pay Yourself?

There are many factors why you became a business owner. Maybe one reason was to sustain or better your way of life. You should be able to comfortably pay yourself from the profits of the company. If you are having difficulties with paying yourself, then you need to perform some of the suggestions previously mentioned to improve income and reduce costs.

Are You Still Satisfied Being an Entrepreneur?

Given the stress and pressure of having your own small business, you need to do a gut check and make sure you still really like what you are doing. You need to make sure the effort is worth what you are getting out of it both financially and emotionally. If daily you dislike what you are doing, its time to make a change. You may find out you like the marketing aspect but not running the whole thing. It is up to you to understand what makes you tick.

There are many ways to evaluate success, but this will get you started on understanding both emotionally and financially so that you can decide whether this business is worth further developing or you should just close shop. Whatever you end up choosing, make sure it is the right choice for you.

If you cannot quickly respond to these concerns, you may need a part-time CFO to help you evaluate your business and put the right process and systems in place.

Kimberly Loftis, President of Loftis Consulting - - a Chicago-based consulting firm, provides affordable interim and part-time CFO services for small to mid-size businesses to improve profits and cash flow.

Kimberly Loftis earned her MBA from Kellogg and her BS in Accounting from Indiana University. She is also a CPA.

More can be learned at

Source: EzineArticles
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