Savvy Business Owners Know the 5 RULES of Profitability

Let’s face it, to stay in business you need to have more money coming in than going out. Understanding the five R.U.L.E.S. of Profitability is key to honing the business in different ways and creating a strong stable business.

So what are the 5 R.U.L.E.S. of Profitability?

R = Rates
U = Utilization
L = Leverage
E = Expenses
S = Speed

These five elements will transform your business if you use them properly.

The good news is it is not hard when you have the right framework. The trick is to pick one or two of the five R.U.L.E.S. each quarter and focus on improving that element. As you build your business plan, you will want to incorporate these focal areas into the quarterly plans.

Let’s look at how to use each one.

R is for Rates or Raising Your Prices.

Pricing is a big element that should be handled with care, but can also make a big difference to your bottom line. The key here is you must give more value to support the increase to the rates. When you give more value, people are willing to pay more.

Think about how you could provide more value to your clients or customers. Could you give them a PDF or printed “roadmap” that helps them visualize the process? Could you provide them with a checklist or other tool to help them stay organized or use your services more effectively?

There are lots of ways to provide more value. If your still not sure, just ask some clients or former clients, “How else could we help you?”

U is for Utilize Your Team.

This means FULLY UTILIZING each team member.

This means DELEGATING to other people on your team.

This means TRAINING your team to do things with utter confidence so they do them faster!!

A key to this Rule is to grow your team and train each person to look for opportunities to hone their skills and delegate down. By giving people a way to “move up” and feel confident in what they do, this is how you build a thriving culture where people don’t want to leave.

By learning to delegate down to the lowest paid person who is competent to do the job, you will increase your profits.

L stands for Leverage Technology.

In today’s world there are so many ways we can use this Rule.

Leverage technology to get the job done faster, and you will see your profits increase as well.

For instance, by automating or integrating programs and data, you can save what otherwise would cost you a half-time position to have someone re-enter that same data or information. Let’s run the math to illustrate. Say you have a $30,000 a year employee, and that person spends half their day re-entering information that was obtained in the sales process or re-entering information of business cards or datasheets. By integrating your various programs and automating the process, that job could be cut in half. That would be $15,000 of additional profit, just by letting the program do it, rather than tedious data entry.

E is for Expenses: Optimize Costs for 3–5× ROI

With soaring costs you have to be a good money manager! Keeping a close eye on your expenses is vital. The trick is to make sure each one is bringing you on average three to five time return on investment.

To start, review your expenses, especially all those little subscriptions and marketing subscriptions and look for items you no longer use or that you don’t recognize. It is amazing how those pesky free trials turn into monthly reoccurring charges and it adds up!

Next, think through “how is this expense making my life better?” Remember, it doesn’t always need to bring a direct cash result. An expense can still bring you a ‘return on investment’ in other ways. For instance, some marketing might be designed to directly bring clients and so you will know if it is bringing a 5x. However, other marketing might be to build your brand and thus be harder to gauge. What is vital is that you pay attention to the expenses and ask questions if something doesn’t seem to be bringing you a return.

S is for Speed of Collection.

The faster you get paid, the more profitable your business. It is that simple.

Speed of Collection is important to analyze because when you are wasting time chasing your money you are losing precious time and money.
Build systems to make sure you get paid immediately for your goods or services, and you will start to increase your collectability percentage.

The five RULES of profitability can create a tremendous surge to your bottom line if you work on them. Don’t try to do it all at once. Do one each quarter and get the whole team on board with helping refine the focal point of the quarter.

Overall, jump in, get started, and start having a more profitable business today.

Kristen David, a former trial lawyer and partner who went from working 85 hours a week and taking home way too little money, to building it up to a million-dollar-plus business. She then sold her shares and pivoted into a business coach guru. She is now an international speaker, bestselling author, and operates a successful business, empowering business owners to build thriving, profitable businesses that are self-managed with systems.  She helps busy business owners build those systems by implementing policies and procedures the Fast Track Way.