Skip to main content
Need tax filing help and guidance? We've got you covered. Click here to learn more.
Know and Grow Your Business

How Profitable Is Your Business? The Answer May Surprise You!

By February 8, 2018December 6th, 2023No Comments

Most small business owners assume that they have a basic understanding of the profitability of different products. However, the reality may be surprising. Many businesses have several products or services, even several customers, that are not as profitable as they believe, which can lead to a great deal of lost profit. Evaluating and understanding the profitability of each aspect is important to making wise choices for the future of your company.

Profitable Products, Profitable Business

Many people assume that they must have a profitable product range because the business itself is making money. However, there is a good possibility that one or more products or services is actually holding you back. The only way to know the difference is to calculate the profitability of each product – what your customers pay minus the costs of manufacturing, storing, selling, and mailing the product.

Similarly, some customers, even ones who buy regularly and pay on time, may actually be losing money for your company as a whole. A few simple calculations are all that stand between business owners and these important figures. However, collecting and interpreting this data is often more complicated than a typical small business owner can handle. Large corporations have full-time accounting crews to collect and interpret this data, but small businesses historically have gone without it.

Profit, Loss, and the Bottom Line

One of the key challenges in calculating which products are profitable is adding up all of the odds and ends that go into the mix. For instance, an item may appear to be profitable based merely on the wholesale cost vs. customer cost, but take up enough customer service time to put it in the red. Packaging, storage, customer service and other costs often detract more from profit than business owners realize. Accurate analysis requires considering all of the costs, even seemingly hidden ones.

Similarly, many small business owners are shocked to find that some of their best customers are actually costing them money. We assume that “a sale is a sale” and focus on moving volume. However, not all customers are equal. Some are buying products with a very thin profit margin while also cutting into margins in other ways, such as shipping. Knowing which customers and products are profitable allows you to make educated decisions and to focus your planning in the right avenues.

Real-Time Cloud Accounting: Providing Answer to Small Business Questions

There are new solutions that allow modern small business owners to reap the rewards of robust data collection and interpretation without investing in a huge accounting staff. Kashoo is a simple cloud accounting program that gives small business owners convenience, accessibility, and access to complex data interpretation. People can input their numbers in a spreadsheet program that is simpler and more intuitive than QuickBooks, with all data stored in a cloud-based website.

Kashoo is designed to allow business owners to easily run reports that show profitability by product, client, sector, and more. This enables even the newest entrepreneur to make educated decisions that support future growth and success. It also streamlines the tax preparation process. People who need additional help can access real-time customer service through the program as well.

What Could You Do With Better Data?

Knowledge is power. With the right data storage and analysis services, even the smallest business owners can make educated decisions about their future. More energy and attention can be dedicated to more profitable products and clients. This data can even lead to new innovations and entirely new markets. The sky is the limit when you thoroughly understand your market as well as your place in it.

Even with the best concepts and products, many small businesses never achieve success. Data and trend analysis often can make a huge difference. Developing a way to store and analyze data could be the determining factor in whether a small business owner achieves the success that he or she desires and deserves. With new cloud-based services like Kashoo, even the smallest business can enjoy the benefits of cloud computing and expert data analysis.

About the Author

Gary Kaplan’s desire for excellence shows in his training, experience, and the service he provides as a top-rated Accountant Boca Raton Florida.

He completed his undergraduate degree and Masters in Accounting at Nova Southeastern University and his Masters in the Science of Taxation at Florida International University. Gary has been practicing as a Certified Public Accountant since 1997, attaining his expertise in all aspects of accounting, business and personal tax and strategic planning. He listens to each client and helps them achieve their own unique goals. Gary values educating others and giving back to his community: he has served as an Adjunct Professor of Accounting at Florida Atlantic University, and gives accounting presentations at St. Thomas University School of Law. He is also a Certified Specialist in Retirement Planning™ (CSRP). Gary is licensed to practice in Florida, Maryland, Utah, New York, and Washington D.C.

Close Menu