Small businesses are the backbone of the global economy, providing employment opportunities and driving economic growth. However, for small businesses to thrive, they must generate a profit or positive income.

How can businesses continue to generate profit? This would seem like an obvious question for every small business owner, but many of them do not really understand how they make money (a profit) in their own company. 

In this article, we will explore some strategies small businesses can employ to build a profit and ensure their long-term sustainability.  

Small businesses can struggle with profitability for several different reasons. They keep prices too low. They focus more on big-picture ideas than real consumers. They may have way, way too many expenses. The list goes on and on.

But even if your business doesn’t make a lot of money early on, the goal should eventually be to sustain operations and earn a profit. 

My Business Entrepreneurship Facilitator Chris Mooney said building a profitable small business requires a combination of everything that makes the business. From the focus on developing a clear business plan, understanding your target audience and market, providing excellent customer service, controlling costs, to developing effective marketing strategies.

“This is all part of a much bigger discussion, and it goes right back to your purpose,” he said.

“It’s about having an idea, doing that market research and confirming that there’s a market and demand for a product or service, and driving the value proposition that the business will provide.

“The exchange of value quality for income has to be assessed by the customer potential.”

Mr Mooney said through his experience working with various businesses, it was important that they pass the business test case.

Businesses need to demonstrate a clear understanding of the market opportunity and the target customers they plan to serve. They should define the market size, market trends, competition, and customer needs and preferences.

They also should articulate a clear and unique value proposition that differentiates them from competitors and explain the benefits of their products or services to customers and how they solve their problems or meet their needs.

“You need to put enough time and effort into making sure you have chosen the right course of action, the right area of interest and that it’s commercially viable,” Mr Mooney said.

“It’s really about planning, and if you align with the overall business strategy, you’ve got the best chance of making it work and realising the plan that you set for yourself.”

It’s a whole-of-business investigation. It isn’t just one aspect. The whole business has to be attuned to maximise your chances of having a profit-positive income.