When your small business is your livelihood, you focus on profits – as you should!
You’ve already taken a great first step by looking into a year-round accounting service like CSI Accounting & Payroll, but is that everything you need to grow your profits?
At CSI Accounting & Payroll, we’ve worked with small business accounting for over 50 years. We’ve heard a lot of common questions on this topic from other small business owners, such as:
- What should my profit margin be?
- How can an accountant help improve my profitability?
- What else do I need to improve my profitability?
Small Business Profit Margins
The first step in determining profitability is considering your profit margin. What should it be? It depends on a number of variables, including:
- Your industry. This matters the most and will vary significantly by which industry you’re in. For some general profit margin examples, restaurants should be 5-10%, and retail and home healthcare should be 10-15%. For auto repair shops with complex parts and labor costs to consider, we offer a free matrix pricing template.
- The goods that you sell, if any. Goods all have their own margins, and there may also be costs associated with reselling goods.
- Your labor cost. Hiring more can mean lower profit margins. You can flex this a little bit, but refusing to hire when you need to can backfire and actually hurt your profits if it leaves your client base unsatisfied.
- How much you reinvest in your business. An example would be investing in marketing during a growth phase. While it lowers your profit margin for a moment, you can increase profits if it’s successful.
On a similar note, small business owners can also – in theory – do their own accounting. That could also increase your profit margin by eliminating the cost of outsourcing your accounting, but it could also backfire and result in higher taxes, less ideal business decisions, and even penalties from the IRS.
Plus, accounting is hard and can take a lot of time that you could be using to generate value elsewhere in your business! Do you really want to be doing it?
How Accountants Can Improve Your Profitability
If you don’t want to do your own accounting, there are a lot of ways that monthly accountants (like the ones at CSI) can help with your profitability.
The largest value add is using a complete tax strategy to minimize your tax liability.
Other than that, monthly accountants can uniquely advise your business decisions throughout the year to find your best path to profitability.
We believe that in most situations, your revenue should be split equally into three buckets: labor cost, operating expenses, and profits. We’ll help guide you there or find your business’s ideal ratios.
What Else Is Needed to Boost Profitability
If you work with a monthly accountant, what else do you need to do to improve your profits?
Actionable Ideas
First, you need action. If your accountant gives you advice, it’s up to you whether you take it or not. The same goes for if you come up with a great idea.
Any move to increase your efficiency, embrace a niche client base, hire the right people at the right times, or market during growth should have serious thought put into it. If it’s right for you, do you turn the idea into action?
Other Financial Partners
We’ve been known to call ourselves the small business owner’s one-stop shop. While we have a wide range of offerings internally, we have to refer some things to our partners.
Even if we can’t help you directly, we know someone who can! You may want the following financial team to aid in your profitability:
- A banker. They can help you from a planning standpoint. A banker can help you generate capital or get a loan.
- An attorney. They can examine your business structure from an operating agreement standpoint or protect your assets with a trademark.
- An insurance agent. They can help protect you from liability. We count this as a part of profitability because if something happens and you lose everything, you have no profits anymore.
- A marketing agency. One with success in your industry can multiply your client base or attract a better client base.
- A consultant. While CSI offers consulting services, sometimes different consultants have different knowledge or experience. Some consultants may be more familiar with how to develop the best growth strategy for your situation.
Remember, if you’re looking for any of the experts listed above, CSI can refer you to our favorites!
Partner With Experts to Grow Your Profitability
Now that you have an idea of what your profit margin should be, how an accountant can help improve your profitability, and how CSI can refer other financial partners to help, are you ready to check out monthly accounting services?
If so, please consider CSI Accounting & Payroll! To see if we can be a good fit for your business, click the button below for a free consultation:
Not ready to talk? That’s okay! First, learn more about what it’s like to work with CSI by clicking the image below:
