How to Make the Most of Your Money

You run a business. That means you’re focused on making money—and not missing opportunities to make more money.

No one is perfect 100 percent of the time. We all miss opportunities and make mistakes. But your livelihood—and the livelihoods of those who work for you—depends on your ability to optimize the bottom line and avoid the traps that sink so many business owners.

It’s not all about selling more product. If you’re moving what you’re making but aren’t optimizing the process, you’re still leaving money on the table.

Money Saved Is Money Earned

You’re shopping for a new car and find the exact model you want—in the midnight blue color you’re looking for—at three different dealerships and at three different prices. All else being equal, you choose the car that’s priced in the middle. Sure, you saved money by not going with the priciest one, but you wasted money not going with the cheapest option. Did you really save money as much as possible? No.

The same goes for your business. It’s not enough to have record-high sales if you’re not producing your product or services efficiently. Every step of the process needs to be optimized to ensure you’re making as much money as you can make.

Instead of just focusing on the end result, it’s crucial you pay attention to the processes that get you there. Here are a few ways to avoid big-time money mistakes that are holding you and your company back.

Optimize Your Profit

You have $100,000 to invest and a crystal ball that tells you how much you can make from two different investment opportunities. There’s the 5-percent earner and the 20-percent earner. Make your choice.

Of course you’re going with the higher-ROI option. You’re allocating your resources to the most profitable opportunity.

None of us have a real crystal ball (you’re likely reading this from your private island if you do), but there are steps we can take to make smart, informed decisions to make the most of our resources.

That starts with evaluating your business’s products to determine if you’re making more profit with less investment and using the following tactics to adjust as needed:

  • Reduce the Cost: Can you produce your product for less money and still create a product of comparable quality?
  • Reduce the Time: Can you produce your product using fewer people hours?
  • Raise the Price: Can you raise the price of your products without making any changes to them?
  • Raise the Volume: Can you sell more of your product?
  • Adjust Your Product Mix: Can you invest more in what’s most profitable and less in the rest?

Establish Reporting Rhythms

How do you know if you’re at your most profitable if you don’t actually know what you’re spending and what you’re earning? If you’re driving in the dark with your headlights off, you’re not going to stay on the road very long.

In order to avoid huge money mistakes, you need to know what’s going on in your business. You need to turn on the headlights.

What does your budget actually look like? When did you last review your profit-and-loss statements?

Reviewing these kinds of reports needs to be routine. You need a process that will allow you to keep tabs on the financial health of your company.

As a business owner, you have myriad responsibilities and very finite time to attend to them. Try automating some of the financial visibility by having a set series of reports that you can review on a regular basis. That includes budgets, forecasts, and projections.

You may have a CFO who manages the day-to-day aspects of these reports, but it’s your responsibility to create your own processes for overseeing the financial health of your company.

Create Team Investment

You can’t give your team money you don’t have. Do each of your team members understand that?

Another important aspect of financial visibility (and a mistake many business owners make) is “opening your books” to your employees. They need to be invested in the bottom line. They need to know how their contributions make a difference.

If you make your business’s finances visible to your employees, they know if you’re winning or losing. It’s that transparency that creates buy-in and motivates people to perform their best so you can make the most of your money.

When you’ve established that transparency, it’s simply a matter of creating accountability (getting employees into the habit of treating the company’s money like their own) and establishing a reward system for buying in (consider implementing a bonus system).

Everything you do as a business owner rolls downhill. Pay close attention to the processes and systems and understand how each piece of the puzzle fits together. If you can do that, you’re well on your way to making the most of your money and making your business as profitable as it can be.

Last modified on August 3rd, 2023 at 3:10 pm

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