Top 7 Mistakes Service Business Owners Make When It Comes to Profit

Top 7 Mistakes Service Business Owners Make When It Comes to Profit

Many business owners don’t make enough profit because they approach it with the wrong mindset. Truth is, once you change how you think about profit, it will come flooding in.

A lot of business owners in the service industry struggle with making a profit because they don’t understand it, at least not fully.

And if a business owner doesn’t have a handle on the company’s figures, the business won’t make enough profit and, as a result, it will never grow.

As you know, profit is one of the most important aspects of owning a business.

It seems like a simple financial term – profit is money that’s left when the company expenses and overheads are all taken care of.

However, for many business owners, profit is something that seems impossible to reach.

This article will explain seven of the most common mistakes business owners make when it comes to profit.

The 7 Mistakes

Whether you’re growing a business, there are many factors you need to take into consideration to make your business more profitable.

But the fact is that this isn’t as easy as it seems. Low sales, too many expenses, increasing overheads, not enough customers, and other financial issues always come first before profit.

When I first started my journey in business, no one talked to me about profit and how significant it is for your company. So, I learned the hard way that there is no point in making money if you don’t get to keep some of it.

If your business is making a profit, it’s financially healthy.

While there are many practical rules and concepts that you should be implementing into your business in order to make it more profitable, the trick is to approach it with the right mindset.

With that in mind, it’s important to get clear on the wrong beliefs business owners have about profit. So, here are seven profit-related mistakes business owners often make:

Mistake #1. Talking About Revenue Too Much

One of the most fundamental mistakes regarding profit in business is that people talk about their revenue too much. This is otherwise known as top-line revenue, and it comprises the highest amount of money a business can generate in one year.

A lot of people use these figures to brag, but it doesn’t paint a clear picture of how their business is actually doing. That’s why it’s important to make a distinction between revenue and profit, as they are not the same thing.

Profit is otherwise known as bottom-line revenue, and it’s the amount of money you as a business owner have left and can enjoy.

And once you pay for the overheads and other business expenses, salaries for your employees, business partners, and vendors, and even after you pay yourself, what’s left can be defined as profit.

Profit, not revenue, is the actual measure of success. And it’s seen as a cushion that makes your business sustainable.

Mistake #2. Thinking They Need More Sales

When it comes to business owners in the sales industry, the common misconception is believing they need more sales to make a profit.

While sales are an important business factor and you need them to make revenue, what’s the point of getting them if they aren’t profitable?

This especially applies to service-based businesses where we sell our expertise, not volume. Selling your service to a higher degree will not make your business more profitable.

Mistake #3. Avoiding Talking About Money

It’s a well-known fact that business owners will avoid talking about money at all costs. They often shy away from discussing financial matters because they don’t believe that they are there yet, and they’re waiting for their company to expand or reach a certain figure first.

But avoiding talking about money isn’t the solution.

The more you put these matters off, the more overwhelming and stressful they will be in the future.

Mistake #4. Not Having a Handle on One’s Business

Even if you own a small business, getting a handle on the company’s finances is a step you need to take. You need to be aware of your financial situation all the time.

If your company only makes enough money to break even, you will never be able to make ends meet.

Now, you don’t essentially need to be a financial expert to discuss your financial situation. But if you don’t have a handle on your business, you will start to see poor revenue results and your company will only suffer.

That’s why you need to take matters into your own hands before it gets too late.

Mistake #5. Feeling Icky About Profit

Discussing profit and analyzing your financial situation is often seen as a huge chore. And some business owners even feel icky about the whole issue, believing it’s a corporate matter that should be left to accountants.

This is where having the right mindset can really help you.

For your business to grow, you need to take profit seriously. Understand that when your business is making a profit, it will continue to grow.

Mistake #6. Putting Profit Last

Another common mistake service business owners make is not prioritizing profit.

When we’re doing business, we tend to focus on primary business expenses and overheads first. Once that’s covered, we calculate the appropriate salary for our employees, as well as our own salary. After everything else has been taken care of, profit takes last place.

This is simply the wrong order of doing finances within a business.

Instead of doing business as usual and hoping there’s some profit left, the trick is to view profit as the ultimate goal.

So, you should put profit first when setting financial goals. You’ll start to see positive results very quickly with this approach.

Mistake #7. Fearing Paying Taxes

Business owners, especially small business owners, have a fear of paying taxes. And they even use having to pay the IRS as an excuse not to grow their business.

The truth is that paying taxes is another measure of success. If business owners pay their taxes orderly, it means that their business has grown and they’re earning more money.

And once you have gathered a sufficient amount of profit, you can use it as a safety net or improve your business in numerous ways. For example, you can reinvest in your business, build your cash flow, invest in your team, or whatever you think would benefit your company.

Prioritize Profit and See What Happens

I like to think about profit as the oxygen of the business.

Without profit, your business won’t be able to operate normally and you will be swamped with new bills and expenses that just keep growing.

The reason profit is so important is because it not only covers your company’s needs but your own needs as a business owner as well. Also, there’s no point in making money if you can’t keep at least a portion of it.

Whether you fail to prioritize profit, can’t get a handle on your company’s finances, or just don’t believe that your small business has grown enough for you to think about profit, these decisions could be putting your business at serious risk.

The faster you change how you think about profit, the more quickly you will notice positive financial results in your business.


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