Why your small business isn’t making money yet – and how to change that
Are you working hard on your small business but not reaping the financial rewards yet? Find out why your small business isn’t making money – and how to change that.
It’s generally accepted that you won’t see much – if any – profit in a new business, or possibly even the first few years. But is this right? And if so, how long can you reasonably expect it to take you to make money?
If you Google how long it takes businesses to be profitable, there general consensus is that anywhere from six months to a few years is normal.
However, the reality for too many small businesses, especially those started by mothers from their kitchen tables, is that real profit (or even any) can often be elusive in the first few years.
And depressingly, some businesses owners assume they’re making more profit than they really are, as they often fail to factor in their full expenses – particularly their own time.
When we work with freelancers and small business owners in programmes like Profit Love, one of the first things we get them to do is calculate how much they’re earning per hour. And they’re usually shocked at how low the rate is – often much lower than minimum wage.
Many female entrepreneurs earn less than minimum wage
The shocking reality is that many women running their own businesses from home would make more money getting a low-paid part-time job.
That’s not right. And it doesn’t have to be that way.
Over the past six years, we’ve worked with hundreds of small business owners and freelancers, and have started to see common patterns in how they run their business. Patterns that help to explain why they’re not yet making the money they’d hoped, or deserved.
The good news, if you’re in a similar position, is that knowing WHY you’re not yet profitable means that you have the opportunity to make changes that will, hopefully, help you to finally unlock your profit potential.
And that work can start today – whether you’re a newly hatched startup, or have been been ploughing away at your business for years. It’s never too late to make a fresh start.
Four changes you can make to your small business to finally make a profit
So what are the things you can do that will make a change to your business? Here are four that we have proven work.
1) Track your time
If there’s one valuable business resource that’s almost always being wasted in unprofitable businesses, it’s time. Time is always finite but, because it doesn’t have a direct value to it, we often make the mistake of assuming it’s free.
But your time is NOT free, and it does have a tangible monetary value.
So the very first thing we get people on our Profit Love programme to do is to start keeping a detailed timesheet. And to demonstrate the importance of tracking and valuing their time, we show them how to calculate the cost of their time.
We then apply this principle to different areas of their business, so they can see what costs them the most time, and which activities or products are the most profitable. We then use this insight to make decisions about where their energy is spent, pricing, outsourcing, and which products and services to focus on.
This simple exercise has been invaluable for our own business. When I started applying it to my own time, I was surprised to discover that the most profitable part of Talented Ladies Club was an aspect I paid little attention to. Or really respected much.
That quickly changed, and I found ways to streamline the processes around this income stream that meant I spent less time on it and was able to process more work through it. This one tweak has added an extra 30% to our monthly turnover.
Do you already track your time in your business? And do you analyse where you’re spending it and what income you can directly attribute to it? If not, I recommend starting today with a simple timesheet (I record my time in 15 minute segments).
You may be surprised at how you’re spending (or wasting) your time. And the insights you gain can help you to make calculated decisions about your business, including pricing, going forward to ensure you’re making enough money.
2) Get your pricing right
Tracking and measuring your time can also help you to make fact-based decisions about your pricing. Too often, with nothing else to go on, small businesses and freelancers base their pricing on guesswork.
The problem with this is that you genuinely don’t know if you’re making a profit or not when you factor in ALL your costs (including time). You’re also more likely to under value your offering. And you can’t be 100% confident about your pricing – a doubt that your customers may well pick up on.
Whatever your income goals for your business, it’s essential you get your pricing right. Not only will it ensure you actually make a profit, but the right pricing will attract customers and help boost your sales.
Contrary to what you may think, offering cheap prices won’t lead to a tidal wave of grateful customers. You’re more likely to put off people because they’ll assume your offering can’t be high quality.
And rather than attract happy customers who love what you do, you’ll be stuck with bargain hunters who are much more difficult to please.
So how can you get your pricing right? Here’s what we recommend:
- Get a full picture of how much it costs you to make and deliver your product or service.
- Know what profit margin you want to earn.
- Research your competition to get a view of the current marketplace.
- Understand where you sit on the quality/value spectrum.
- Test the market with strategies like the Triplicate of Choice.
Need help with your pricing? Our Pricing Masterclass will give you practical tips you can start implementing straight away so you can start pricing for profit. You’ll also be able to talk about money with confidence – no more discounting or giving too much away for free!
3) Sell every week
I have a simple mantra that I repeat often to people on Profit Love: “If you want sales, you need to sell.”
It’s funny how many women in particular have a fear or hatred of sales. But you can’t run a business without selling. And selling should not be a dirty word.
Every business exists to solve a problem. And all sales involves is finding the people who have the problem you solve, and letting them know how you can solve it for them. Then giving them the choice whether or not to buy from you.
That’s it! You have no need to fear selling – there are people out there right now who want and need what you make or do, and want to know about you.
And the simple truth is that if you aren’t actively selling regularly, people won’t hear or think about you, and you won’t get enough sales to run your business.
So what are you doing to sell? In week two of Profit Love, I get business owners to brainstorm ideas for Quick Wins: ways they can get sales right now – money that is there for the taking in their business but they’re currently missing. And I get them to plant sales Acorns – set up systems that can bring sales in regularly going forward.
Importantly, I ask them to spend time every single week on sales. I recommend time blocking at least two hours a week and spending that time on sales. If you do this every week you should start to see a difference in your business.
One business owner I work with sent one email out to previous customers, and it brought in a £900 sale. Another created two new half-day workshops for customers that netted her over £1,900. This was money that was there to be earned but, without actively selling, they would both have missed it.
What money are you missing in your business? And what can you earn if you actively start selling every week? Here are some ideas of quick sales wins you can try:
- Emailing lapsed customers with an offer.
- Emailing potential clients who didn’t sign up with you.
- Following up abandoned carts and sales page click throughs.
- Contacting happy customers with incentives to buy from you again.
- Cross and up-selling.
- Maximising your opportunities on social media.
If you’re not already doing so, I recommend scheduling time in your diary every week specifically to work on sales. With focus and a concerted effort on sales you can’t help but see a difference in your business.
If you struggle with selling, or don’t understand the sales journey or funnel, watch our Campaign Masterclass.
4) Be consistent
Woody Allen once famously said that “80% of life is showing up”. And the same is true of business.
Of all the business owners I have worked with, the ones who have seen the biggest success are those who showed up. They turned up for every call and did the work – completed every exercise and homework assignment, and followed and applied my advice.
It’s this constantly reliable approach that has made Talented Ladies Club successful. We’ve published an article almost every day for over six and a half years. And we’ve religiously shared them on social media.
In the early months, we didn’t get much traffic on our site, and we didn’t make any money because we didn’t yet have anything to sell. And we had no guarantee that would ever change.
But still, every day we showed up and did the work. We didn’t slack off, take shortcuts or give it less than 100%. And it paid off. A year after we launched, Google started sending search traffic our way, until we were eventually getting over 90,000 people a month on our site.
What would have happened if we’d given up before Google started ranking our content? Talented Ladies Club would have been a failure. And we’d probably have assumed that ‘content sites don’t work’. As it is, we’re here, we’re growing and we’re profitable.
So what’s my advice to you, and how will it help you make money sooner? It’s easy: work out what you need to do to make money and keep your business growing, and do it.
The chances are, this won’t be something big and sexy. Instead it will be following the right advice and sticking to the daily grind consistently. Don’t let yourself get distracted by the next shiny thing, and give up on something before it has a chance to work. Who knows what you’ll miss out on?
You should NOT have to work for free
There’s no reason why, past the planning stage and really early first days, why you should work for free in your business. And indeed, if you start out with a poverty mindset – that money is hard to make and you’ll need to work thanklessly on your business for years – then that’s the business model you’ll unintentionally create.
You’ll make decisions that will confirm your unconscious beliefs about business, and find it much harder to ever reap the financial rewards you deserve from your efforts.
So please, don’t make yourself a slave in your own business. Don’t simply assume and accept that you’ll need to work for free – or not far off it – just for the honour of working for yourself.
Instead, treat your business (and yourself) with the respect you deserve, and start making decisions and taking actions that will finally unlock your profit potential.
Get 121 help to identify the changes YOU need to make
Above we’ve outlined four things you need to be doing in your business to earn money, but they’re just scratching the surface. You need to ensure that everything you do in business is aligned to making money (and keeping it).
If you’d love 121 help in identifying the areas you need to change to make money, and get positive guidance and practical advice – with specific actions to take – you can book a personal one-hour coaching session with me here.
Here’s what one business owner says of working with me:
Love to work with Hannah Martin, the founder of Talented Ladies Club, to improve the profitability of your business? Book a 121 session with her here.
Photo by Ansley Ventura