5 Ways to Grow Your Profits

 

These are the five simple factors:

 

1. Leads: The total number of people who have contacted or who have been contacted by the business--over the course of a year.

2. Conversion rate: The percentage of people who actually make a purchase. For example, if 10 people walk through a store and three people buy something, that store’s conversion rate is three out of 10, or 30 percent, for that day. 

3. Average dollar sale: The average dollar amount per sale, estimated over the course of a year. The average can range from $5 or $10 (say, for a discount retailer) up to tens of thousands of dollars (for a business such as a car dealership). 

4. Average number of transactions: The number of purchases the average customer will make over the course of a year. Again, it can be an estimate. This number will probably be larger in a retail setting than in companies that operate in a professional services industry.

5. Profit margin: The profit percentage of each and every sale. Simply put, if a business sells something for $100, and profit was $25, the profit margin is 25 percent.

Source: Entrepreneur.com

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Here are three questions received recently at AskJim.biz from budding entrepreneurs like you. Take a look and see if they help. And remember, always seek excellence, not perfection. 
--Jim Blasingame,
The Small Business Answer ManTM

Q: Should I operate under a DBA? What is it, exactly?

A: DBA is an acronym for “doing business as,” which is when a corporation operates a business under a name that is different from the incorporated name on file with the state in which it’s domiciled. The primary reason for identifying a DBA is to ensure that the public can identify the legal owners of the business.

Here are two reasons to operate under a DBA:

1) to establish a business brand that may be more intuitive and marketable than the corporate name, and

2) when one business acquires another with a name that is already established.

Most states require a DBA name to be registered, so check the laws in your state.

Q: What questions do I need to consider before purchasing a franchise?

A: First, let's get a couple of terms down: A franchise-seller is called the franchisor; a franchise-buyer is called the franchisee. Purchasing and operating a franchise is entrepreneur’s version of coloring inside the lines; you get the rush of being your own boss without having to come up with all the answers.

The bad news is that the franchise universe is broad and intimidating. The good news is that the fundamentals you apply to conduct your purchase research are basically the same, regardless of the franchise you choose.

To establish a strong franchising foundation, build your inquiries of franchisors around these four fundamentals:

1.  Is it a proven prototype?
2. Does it have a strong management team?
3. Does it have sufficient capital?
4. Does it provide comprehensive training?

Any franchisor worth his salt will ask you a lot of questions, especially financial. Any smart franchisee prospect will return the favor and ask lots of questions back. Plus, he’ll ask for references from existing franchisees.

Finally, buying a franchise is a big decision. Unless you have professional expertise in this area, it’s probably best to get additional counsel from a franchise professional.

Q: How do I know what kind of homebased business to start?

A: First, you must determine that you can legally operate a business from home in your locality, neighborhood, subdivision, etc.

Some residential areas prohibit any kind of business activity and some identify specific types of businesses that are prohibited. 

The next step is to identify what you have to offer potential customers that 1) you can actually deliver, and 2) you have a passion to do. Customers have many options these days, and you must be able to differentiate yourself. You also must love what you do so much that you want to keep doing it, even in the face of the ever-present challenges of homebased business.

A homebased business involves your family, finances and lifestyle to a greater degree than a traditional venture. Be sure you've taken all these areas into consideration. Check with your local chamber of commerce and Small Business Development Center for more help and information.

Jim Blasingame is the award-winning host of The Small Business Advocate Show and creator of the small-business knowledge base AskJim.biz. Also find Jim at smallbusinessadvocate.com.

Originally published in the June 2009 issue of Entrepreneur's StartUps

This Month's Featured Entrepreneurial Resources...

Social Assistance for Starting a Business While Disabled

http://www.socialsecurity.gov/disabilityresearch/wi/pass.htm

The Social Security Administration's PASS (Plan to Achieve Self Support) program is a resource for people with disabilities who want to return to work or start their own business.

Center for Independent Living of Northeast Minnesota

www.accessnorth.net

Providing services to people with disabilities throughout northeast Minnesota.