What is Profitability?

There's a lot to do but so little time to accomplish everything when operating a small business.  Even though this is true, many business owners remain hesitant about opening up their accounting records to a part-time accountant or business consultant even when they know their financial records are in shambles.  

Profitability is a primary goal of all business ventures. Without profitability the business will not last in the long run.  Analysis of profit is of vital concern to stockholders because they derive revenue in the form of dividends.  Profitability is measured with income and expenses. Increasing profitability involves determining which areas of a financial strategy are working and which ones need improvement.

In a competitive marketplace, a business owner must learn to achieve a successful level of profitability. Without sufficient capital or the financial resources used to sustain and run a company, business failure is imminent.  The bottom line is that no business can survive for a significant amount without making a profit. Measuring growth is possible by looking at statistics such as your weekly sales, staffing and turnover.  

Though present profitability of a company is good, as a business owner you should always explore future opportunities for greater profitability.  Below are three key questions to consider when outlining or revising a business model:
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• What is the cost to staying in business?  As a new business owner the amount of funds spent to get you started may not be the same when it comes to staying in business.  But what is that amount?
• Are you pricing product/services accurately?  It is wise to do your research on the industry and like competitors in your area.  Don't leave money on the table.  Trust your skills and knowledge -- that's how your customers become to trust you.
• Expenses can break your business.  Too often we here about entrepreneurs unable to reach business success past the five year anniversary of their launch.  While many factors may play a part into this, what remains key is analyzing the resources of income and expenses of your business.  

If your company is designed with weak areas such as sales, performance and unexpected growth it can cause your entire business to collapse.  Profitability and growth go hand in hand.  

Take time today to answer the necessary questions about your business stage and the next three to five years of future expectations. What are the areas of your business that concern you?

Here at Fontenot and Associates Solutions, LLC we offer one to one consultations to ensure we put it on paper for you and your customers. Let's get started today with setting your business apart.  

Click here to email us your questions. 

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“It’s fine to celebrate success but it is more important to heed the lessons of failure.”
​-- Bill Gates