There comes a happy stage for most entrepreneurs when the grinding and
grubbing eases off. You’re past the break-even stage, you’re protable, and
you can start to focus your mind on what else you might achieve.
At its basic level, you might decide that all you want is to provide your-
self with a good income and your ambition is limited to maximizing the
income, not just in the short term but for the future too. But for others,
income maximization is not sufcient. Instead, you can see opportunities
to transform yourself from a small business into a larger business. You may
even decide that you want to go for growth in a major way, ending up
with looking to obtain a quote on one of the stock markets – the growth
of the Alternative Investment Market (AIM) has been a huge success for
the stock market, and more than 3,000 companies have raised money on
it. After all, there are businesses in the FTSE-100 that 20 or 30 years ago
were still small. And ironically some of the companies with major stock
market values are not huge at all but are valued very highly by investors.
Companies may have relatively small revenues, may still be unprotable
but are nevertheless worth millions because of their perceived potential by
stock market investors.
Generating large capital values from a business that you start is a roller-
coaster, and many businesses lose their founders along the way. Someone
else with different management skills may be needed to take up the chal-
lenge on your behalf. What you want to achieve is to maximize the value
that you can obtain for your efforts.
352 The Financial Times Guide to Business Start Up 2012
What is in this chapter?
how to increase prots (p. 352).
going for growth (p. 358).
Phase 2 money (p. 360).
managing change (p. 362).
How to increase prots
The billion-dollar question is: ‘How can I increase my prots?’ The whole of
this book should help you to do so: the sections on how to set up your busi-
ness in the most efcient manner and those on how to plan and control
your business, how to increase your sales and how to manage the workplace
properly. All of these can help you to make bigger prots.
However, if you strip running a business down to bare essentials, there are
three main ways to make bigger prots. The rst two methods are what you
would use for the short term; they apply particularly if you are struggling to
reach break-even point. But any well-run business should constantly be on
the lookout for the sort of improvement you can make. The two methods
are cutting costs and increasing prices.
The third way of increasing prots will take longer to achieve the desired
result. It is selling more. It will also, very often, involve you in spending
more money to carry it out.
The quickest way of selling more is to try to sell more to your existing
customers. This implies that your existing customers are happy with your
service or product. That is the rst step – focusing on and improving the
quality of what you do already. Selling more may require greater invest-
ments in promotion or selling effort, but obviously your aim should be to
make the existing levels of investment work more effectively for you.
You should not overlook the few occasions when you can increase prots
by altering your sales mix; it may even mean selling less. This may occur
if you have a range of products, one or more of which does not cover its
costs. The answer: rationalize your product line. An investigation of your
customers may reveal that some of the very small ones do not buy suf-
cient quantity to cover the cost of selling to them. This may also lead to
the conclusion that selling less means higher prots. There may also be the
odd occasion when you can alter your sales mix by introducing a product