The word “fast” is relative. Some companies can stay in business for five or more years before generating enough profit to pay the owners. With Bearded Brothers it took two years, but I believe it could have happened faster. Focusing your time and energy on the right things will help grow your company to profitability fast. Finding the right things to focus on is crucial though, and will vary from business to business, but here are seven things I have found to be key to achieving profitability fast.
- Know your margins, and charge what your product is worth
Nobody can afford to work for free, and one of the best ways to ensure you start bringing home a paycheck fast is to sell your product at a 40% gross profit margin. This might mean you have to sell your product at a higher price point starting out, but at least you won’t go out of business trying to keep the lights on. If you are selling a high quality product, don’t be afraid to put a high price tag on it.
- Keep overhead low
You’re don’t want to run out and spend thousands of dollars on an office and production space when you first start out. The same is true a couple of years into your business. Get by with as little as you can, for as long as you can. Your best option is to find space you can sub-lease until you truly are ready to move into your own space. Shop around to and make sure you find the best deal. Most commercial kitchen spaces will charge you by the hour, but you are better off finding a space that will allow you unlimited access at a flat fee (this situation is harder to find, but not impossible).
Aside from your production space you really won’t need an office. Most of your days will be spent driving around town delivering product to your customers, and trying to gain new customers. The few hours a day you will have to do office work can be done from home or a coffee shop.
- Hire slow, fire fast
Once your business gets to the point you need to hire people to help you make your product, you are going to want to take your time hiring. It’s going to be VERY tempting to just hire the first person that applies, but that is a recipe for disaster. The more time you spend on the hiring process, the longer the person you hire will stay with you. This is largely because you have done the due diligence to make sure you have a good fit for the position. If you fail to take the proper time on hiring you will pay the cost in having a high turnover, which will end the end cost you a LOT more time.
- Focus on the key accounts
One key metric to pay close attention to, especially in the early stages of your company is: how many units do you sell per point of distribution. Maybe you have a particular type of store that sells more product than others. This should lead to two actions on your end. One, spending more time helping this accounts sell even more product, which is usually done through sales and active product demos. The second thing you should do is find more similar accounts. For example, if you are selling 8 cases of your product a month in coffee shops, but only 2 cases in a small convenient store, you shouldn’t focus your energy on gaining more convenient stores, but more coffee shops: because that is where you will sell the most units.
- Online sells
Selling your product online is where you will gain the highest profit margin: thus it makes sense to focus a bit of your energy growing your online presence. There are several ways to grow your business online, but when you are launching a new product, the best way is gain influencers. Send your products out to bloggers, YouTubers, Instagramers, and anybody else you can think of that has a large audience to share with that can help you get your message out. Other ways to get your message out is through Facebook Ads and Google AdWords. Both can be a bit of investment, but can pay off big if done right. Start small when experimenting with ads, but you might want to go big if you can come up with the cash to pay a professional to optimize your ads to get the biggest reach.
- Sell, Sell, sell
Cash flow is the lifeblood of any business. Do whatever you have to do in order to focus your energy on selling your product. This is going to mean doing whatever you possibly can to remove yourself from the production and day-to-day operations of the business. This will mean having to hire people to work for you and delegate responsibilities to them. Freeing yourself up to sell your product is crucial. Most all your time needs to be spent on selling and growing existing business. Without this, your company will remain stagnate and won’t see the traction it needs to in order to be profitable.