One of the biggest questions I’m hearing right now from founders is “how do I become profitable?” This is due mostly to investment funds slowing down for new and existing founders who previously took investor funds. 

Now if you know me, I’m a huge fan of taking VC money for a slim number of scenarios but don’t believe it should be the default funding method for business.

That said, I wanted to share 6 ways to increase profitability and hopefully reach breakeven or profitability. 

1) IDENTIFY AND FOCUS ON SELLING YOUR MOST PROFITABLE PRODUCTS. 
It’s important to create products with high-profit margins from the start because margins only decrease as you grow. That said, if you have existing products, look at your current assortment to focus on the most profitable products or pack sizes. With TeaSquares, I used to sell our energy bars wholesale with an inner pack minimum. Then I increased the minimum to a master case, and then to half pallets. While you might lose some smaller customers, it increases your profitability for every customer you are serving.

2) BREAK DOWN YOUR MARGINS AND PROFIT BY SALES CHANNEL. 
As brands, we often lump all of our sales and cost data together without taking a per-channel view. E-commerce margins will be drastically different than all-in retail margins. Be sure to measure and report on each channel so you can create the right assortment mix for your brand.

3) LOOK AT YOUR COGS ON A REGULAR BASIS.
Regularly review your supply chain costs, pricing, and relationships. I had a decent almond supplier in Washington state that shipped to our Chicago warehouse. BUT, shipping accounted for 30% of our ingredient cost, upward of $400 per shipment. I was able to find a Chicago supplier with free dropoff, reducing our costs 30% and increasing our delivery speed. Make sure you’re regularly optimizing your supply chain.

4) CHART YOUR CASH CONVERSION CYCLE AND PLAN AROUND IT.
The hardest thing about having an inventory-based business is that you have to pay for inventory in advance before you get paid for selling it. That means you need to have an ever-increasing amount of working capital on hand to support the initial investment until you get paid.

5) MAKE SMARTER, MORE STRATEGIC DEBT AND FUNDRAISING DECISIONS
Founders (including myself) are often hesitant to take on debt for their business because they aren’t profitable and aren’t sure how they’ll pay it back. That said, strategic debt can be a huge boost to your business with the proper mental and financial planning around it. Just make sure you have a clear understanding of your margins by channel as stated above, so you can understand exactly how much money you have to pay towards interest.

6) CONSULT THE RESOURCES IN THIS PDF BELOW
I put together a number of free resources and information with the help of Brad from Accountfully to help you have a better understanding of your financials. Download the PDF and click on the links to read even more.