7 things the most profitable businesses have in common
While every business is different, the most profitable businesses have a few things in common. Once you know what they are, you can incorporate them into your solo endeavours.
While profitability is by no means the only measure of business success, for most soloists it’s pretty important; most of us have mortgages to pay, children to clothe and a lifestyle to maintain, right?
Happily for us, Phil Ruthven of IBISWorld recently delved into the profitability of Australian businesses. While the 12 guidelines they came up with for profitable businesses were mainly aimed at larger enterprises, I found seven that apply equally to success for small and solo ventures too.
So, without further ado, here are the seven things profitable small and solo businesses have in common:
"Unless you’re independently wealthy, you need to find a way to be profitable if you’re going to last the distance as a soloist."
1. Profitable businesses stick to one area rather than trying to diversify and do everything
The saying “Jack of all trades, master of none” would appear to ring true when it comes to business profitability. I have seen firsthand how spreading yourself too thin can lead to both burnout and lack of a clear business focus. If you’re feeling a bit burnt out, now might be a good time to look at the number of products/services you offer and rationalise whether those products/services are all giving an appropriate return. If the 80/20 rule applies here, then for most of us 80 percent of our profit comes from 20 percent of our business activities. So why are we spending so much time on the 80 percent of business activities that are only generating 20 percent profit?
2. Profitable businesses go niche
Most profitable Australian businesses make money by being a big fish in a small segment of their industry rather than trying to dominate everything. This makes sense for soloists who don’t usually have the budget and resources for world domination.
3. Profitable businesses make use of outsourcing
Outsourcing enables growth by removing you from doing activities that don’t form the core of your business and getting them done elsewhere. I meet so many soloists who run themselves into the ground trying to do it all when they could affordably outsource many of the tasks they aren’t skilled in and spend their time working on their business rather than in it.
4. Profitable businesses get good financial management
Trying to do your own books and tax return might seem like a good way to save money but it will probably cost you in the long run (unless, of course, you are an accountant!). When you have a professional handling your finances, this doesn’t just free up your time, it allows you to make better decisions about how, why and why you spend your money, something that is key to the profitability of any business.
5. Profitable businesses are ahead of the curve when it comes to industry lifecycle changes
Staying on top of industry developments is essential if you want to be a leading edge business owner. We are living in a time of rapid change and profitable businesses are the ones who can anticipate the next industry development and be there to meet it, rather than simply reacting to it when it arrives.
6. Profitable businesses develop strategic alliances
No soloist should be an island. Are there other soloists or organisations you can align yourself with for mutual benefit? I have seen firsthand the benefits of strategic alliances when it comes to marketing. Think about who you might be able to align with, for example, a beauty therapist could team up with a hairdresser, and a physiotherapist might ally themselves with a personal trainer. The trick is to pick someone who shares your target customer base but is not a direct competitor.
7. Profitable businesses are unique
This doesn’t necessarily mean you have to find something nobody else is doing, but you can at least try to go about what you do in a different way. Think about what you offer and the overall experience your clients or customers have when they work with you. How can you make it unique and distinctive, and a reflection of your values and philosophies?
The top businesses in Australia all do these seven things and more, and as a soloist, following these tips can make a big difference to your chances of success.
There are no guarantees but if you can do all these things you will be on a strong path to meeting your solo business goals, and getting the business and lifestyle you have always dreamed of.
What is your top tip for soloist profitability?