Many people who want to start a business feel a bit intimidated by all of the typical expenses that it takes to get a new business up and running. Business expenses are a necessary fact of life for small business owners, but they don’t have to stand in your way of success. With smart strategies and a well-thought-out business plan in place – and perhaps with business loans to cover necessary expenses – your business can grow and become profitable quickly, even if you have lots of business expenses on your balance sheet.
Here is a step-by-step beginner’s guide to becoming profitable as a new business owner:
Identify a Lucrative Problem that You Know How to Solve
Every small business is ultimately in the business of “problem solving.” Whether you’re a restaurant owner solving the problem of people feeling hungry, an Amazon seller giving a place to find unique gifts and merchandise or someone who sells handmade items on Etsy for people who want a special one-of-a-kind gift or personal care item.
The first step to profitability is figuring out exactly what kind of problem you are solving for your customers and whether or not there is a serious profit to be made. A good way to see issues consumers are facing is looking in your own local community. For example, let’s say the nearest auto shop is too far away from your community. People are tired of having to drive 30-45 minutes away to get their car looked at. You can open your own auto shop in your community which first, solves the problem and second, will provide you with a serious profit.
Do Your Market Research and Figure Out Your Profit Margins
Once you have identified a problem that you’re passionate about and feel like you have special expertise to help solve, do your research. Learn more about the market that you want to serve – is the market growing or declining? Is the market “saturated” with too many other businesses competing for increasingly scarce customers? How does the market work? What are the typical prices that your competitors charge?
Market research doesn’t have to be expensive or fancy. It depends on what kind of business you want to start, and it can be as simple as visiting rival restaurants or checking out other Amazon sellers’ pages. You need to have a sense of other companies’ pricing strategies so you can figure out how much you need to charge for your goods and services in order to be profitable.
Find Your Minimum Viable Product (MVP)
In business, “MVP” doesn’t mean “Most Valuable Player” – it means “Minimum Viable Product”. This is the smallest number of units that need to be sold in order to demonstrate proof of concept and make a profit. The idea of MVP is a useful way to test a new business idea. Whether you’re selling handmade goods, food or some other physical product that needs to be manufactured, it’s important to calculate in advance exactly how many items you need to sell in order to recoup your costs and make a profit.
If you’re doing a simple home-based business, calculating your Minimum Viable Product is even easier. First, figure out how much money you need to spend on raw materials for your handmade goods, and/or how much time you need to spend doing the work for a given product or service. Also, make sure you can pay yourself a good hourly wage after covering your business expenses. For a restaurant idea, you can start out with a proof of concept by doing a smaller, cheaper “popup” restaurant first or by catering for private events. Start small, see how much money you can make and then scale as soon as you’re ready.
Outsource Whatever You Can
Another way to achieve profitability as a small business owner is to relentlessly focus on what you do best and outsource the rest. This means it’s alright to spend some money on business expenses if they help get your business up and running more quickly – hire a web designer to get your website up and running, or sign up for a subscription to online tools. For instance, Wix offers simple designs for small business websites. It’s also worth spending some money on outsourced services for your business. For example, if you’re an Amazon seller, using Fulfillment by Amazon is a great way to simplify your business by outsourcing the product shipping and payment processing to Amazon.
Another example is if you’re great at creating and selling your product, but you hate working on the accounting side of your business then you can look into hiring an accountant or buy a tool that will help you easily manage your expenses. With the right person, who excels in accounting, you’ll be able to successfully manage your finances and see what is and isn’t working to make your business profitable.
Ideally, outsourcing will ultimately save you money and increase your profitability because it frees up your time and energy to focus on growing your business, making big, strategic decisions and putting in the creative work that makes your business unique. Don’t get bogged down with mundane details and don’t be afraid to relinquish a bit of control. Be willing to spend some money on online business tools and other outsourced services that help you save time, stay focused and run your business more efficiently.
Promote Your Business Aggressively
Once you have your business plan in place and you have an idea of what prices you need to charge in order to be profitable, it’s time to start marketing. As a small business owner, you need to be the biggest cheerleader for your company – you need to believe in what you’re doing and you need to see the value in what you sell. Don’t be afraid to make cold calls, offer free product samples, attend networking events, participate in online forums and social media conversations, introduce yourself to people (and carry business cards) wherever you go and generally spread the word about your business. There are lots of great online tools for small business marketing, but some of the best small business marketing results – especially in the early stages of your business – will come from your own personal hustle in telling the world about what you do.
Learn social media marketing tactics to maximize your organic growth
Learning about social media marketing tactics is another great way to promote your business. Facebook, Twitter and Instagram all offer tools and tips for promoting your business via their social channels. For example, they all incorporate hashtags. Hashtags have great organic power, especially for Twitter and Instagram. By using the right hashtags, your posts are able to reach non-followers without having to pay to do so (i.e. buying an ad).
Your social media channels should also produce engaging, shareable content. They should tell the user a story. Why do they need your product? What can it do for them? You want the user to see your post and feel something. If they engage emotionally, they’re more likely to engage on your post by commenting, sharing or tagging their friends to see it.
Another way to expand your business’s social media presence is to reach out to influencers in your market. This doesn’t necessarily mean celebrities, but those who have a strong social media following in the market. Do some research to find some of the most influential people in your field and reach out to them. Your pitch needs to catch their attention, short and to-the-point and needs to be tailored to that researcher. Don’t copy and paste the same pitch to multiple influencers. You need to show them that you value them as a person and their power in the market. Of course, you’ll also have to offer them something, like a free sample or a chance to be featured on your page, should it have a fairly strong following.
A great example of this is Fashion Nova, which built its entire company on Instagram. Fashion Nova recruited thousands of social media influencers for their brand. With this campaign, Fashion Nova has boomed to a staff of 600 people producing 500 new designs per week. The company now has an astounding 7.1 million followers on Instagram. Of course, social media campaigns like this take time. It took Fashion Nova three years to see all of this success.
Business expenses are nothing to be afraid of. If managed correctly, they’re a necessary and helpful part of creating your product or selling your services and getting your business off the ground. But you need to have a plan in place, before you even start your business, for how you are going to make a profit on everything you sell. As long as you can cover your business expenses with enough of a profit margin to be comfortable, you don’t have to be preoccupied about expenses. Focus instead on growing your top-line sales first and then look to adjust your expenses as your company grows.
Author Bio: The Kabbage Team is here to not only fund the small business loans you need, but to help you grow your business through free marketing tips, webinars, tools and more. Kabbage empowers small businesses through straightforward, flexible access to capital. We’ve extended more than $2 billion directly to small business owners and powered automated funding for other organizations all over the globe – all while maintaining a remarkably high laughter quotient.