Why Can’t I Make More Money??
How many times do you ask yourself that question?
It’s difficult to diagnose problems and answer that question, if you don’t have hard data (that is, good bookkeeping records). As someone who’s mentored hundreds of farmers and food entrepreneurs, I identify five big reasons why you’re still not making enough money (that is, profits and cash in your bank account).
1. You focus on revenue and not profits
Perhaps the biggest mistake I see farmers make is focusing on revenue… spending tons of energy just trying to sell, sell, sell! Certainly, sales are key to any successful business, but if you’re going to earn more profits (i.e. cash in your pocket) then you need to make sure you’re selling your most profitable products. If you only make $1 on every chicken you sell ($25 sale price less $24 cost of production) … you’d be hard pressed to sell enough chickens to earn a decent living. What should you do?
- Make sure you price your products profitably (and know what it costs to produce)
- Manage your production costs
- Focus on selling your most profitable products
Learn more about calculating the cost of production.
2. You don’t properly capitalize.
Borrowing money is scary, and no one likes to be in debt. But sometimes the only way to grow the way you want is to take a little risk and invest. It can be as simple as purchasing a tractor to increase your efficiencies preparing beds, or it can be more extensive such as building your own processing facility.
I know that feeling too: “I can’t possibly pay back the loan with the revenue (and profits) I have now!” you tell yourself. That’s why creating a plan and budget is so important. You can lay out how the investment will improve your profits and reduce your expenses.
And if you borrow too much money, you can unnecessarily strain your business.
When you lay out the numbers on paper (or in an excel spreadsheet), you can see if you can afford to take on a loan. And if the numbers don’t make sense (and cents!), then you can consider other options.
Learn more about investment decisions and enterprise budgeting.
3. You don’t know where the money goes
It’s hard to earn more profits, if you don’t know where all the cash goes. Are you carrying too much debt (and paying more than you can afford in interest), are your operating expenses too high (and if so, which ones?), are you charging enough for your products?
Knowing where the cash goes is the first step in figuring out how to earn more profits. It lets you know where you need to focus your energies: if it’s reducing expenses, refinancing loans, raising your prices, or increasing sales.
Learn more about how to set up your QuickBooks so you can better track where the cash goes.
4. You don’t spend enough time reviewing
Maybe you keep good records, maybe you don’t. After all, you only have so many hours in the day to get all your chores done. Even if you get all your numbers into QuickBooks, then what? What do you do with the mountain of data?
First, you need a system of bookkeeping that works and doesn’t feel like a chore (and I can help you with that). Second, you need to know how to interpret all the numbers. Bookkeeping will feel a lot less burdensome, if you know what to do with all the data when you’re done.
Join my free webinar to learn how to read financial statements.
5. You work harder, not smarter
There’re only 24 hours in a day, and at some point, you need to eat, sleep and shower. You can only work so hard, so if you want to grow your business, and increase your profits, you need to work smarter! And that means focusing on your most profitable products and sales channels, and let go of the things that drag your business down.
If you keep working hard, you may just be spinning your wheels, getting overwhelmed and getting even less done.
Now you know why you’re not earning more profits, so how do you change your mindset and business habits??
That’s what I’m here for! To help you understand what you need to adjust and help you get there. In addition to the one-on-one consulting, I offer my signature course:
The Farmer’s Office Online Course is designed to help you take business management one step at a time, so you can work smarter, not harder. I teach you everything you need to know about understanding the economics of your business without leaving you overwhelmed.
