I have seen many businesses that do not make a profit.
Sometimes they think more volume will fix the problem. If they can get sales up, they will make money.
That may be true IF you make a good enough gross profit and IF you do not add to indirect (G&A) costs.
You may have things set up right but are just below your breakeven. Then there is the issue as to whether there is more business even available for what you sell in your area.
But I have seen many examples where a company then gets volume up and STILL does not make money.
This company should NOT try to grow topline business anymore.
Instead, focus on making a profit with the volume you have.
The problems could be –
1) Direct costs are too high and gross margin is too low.
2) Prices are too low. (Or too much discounting.)
3) Indirect expenses are too high.
There could be other reasons, but I’d bet most fall into one of these categories.
What is your main issue to fix to make a better profit?
At the moment our sales commission, direct payroll and material cost are on target, which has led to a healthy gross profit. Our indirect payroll is a bit high (1% over goal) as a function of being a little light on install revenue. We are in the process of rebuilding production capacity to address this. Additionally, there is quite a bit of”diamond cutting” we can do to gain even more.
Go, Austin!
One of the things I have observed in struggling businesses is the principle owner taking too much of the business resources for personal compensation. This would be classified as Indirect Costs are too high. Many business schools will tell the principle to pay themselves what they feel they are worth, pay themselves first and then pay everyone and everything else last. That’s a recipe for disaster. The owner should be the last one paid and only pay themselves what their business is able to afford. If they want to raise their own pay then increase their business output.
This can be equated to the people who live on credit rather than cash. Living on credit requires you to pay interest which then requires more income to yield the same purchasing power. Living on cash doesn’t penalize you for making purchases and allows you to consider the purchase more carefully before making it.
In business if you pay yourself last then that will allow you to grow your company which will allow your company to pay you more and more. If you pay yourself first then you are likely to plateau early in your business and never actually grow.