Having been in business for 17 years and built 2 companies, our team understands what it takes to build a profitable business. Having said that, there are ups and downs when you are self employed when it comes to those profits. There are some factors out of ones control, the last 2 years national economics are one example.

Besides the hard work, commitment, sacrifice and long long days of first starting your company, it takes planning, strategy and a whole of mistakes and failure to build a profitable business.

That’s right… I said it, mistakes and failure! However, one can always learn from anothers misfortune. In other words, you will make mistakes along the way however you can learn from other people and not make the “same” mistakes others have made. Which brings me to the point – Profits. I have had the idea of writing about this for weeks but never had gotten around to it. Today, one of my fellow Twitter friends by the name of Steve Pohlit.

The following was written by Steve and can be found on his blog: Thanks Steve for writing this!

It is important to understand that in order to build profits, a profit must first be earned. If your business is a start-up or has been losing money, the main focus of all your activity is to make a profit.. not just any profit, but a cash profit. Cash profit is where your cash balance is growing after you cover all your expenses whether they be paid daily, weekly, monthly, quarterly or annually.

If your business is not in a cash profit situation, you will not be able to stay in business indefinitely. There will be a point when you run out of cash and you have to close your door. In the Proof of Concept article I mentioned Twitter as an example of a company whose business model is exciting but whose excitement will eventually die if it does not turn profitable.

One of the best ways to begin making a cash profit and then make even higher cash profits, is to develop a financial performance picture twelve months in advance. This financial picture is how you want you business to look financially a year from now. I always advise clients when doing this work to look at what the business has been able to earn in the past and then increase it significantly.

Individuals use a technique know as vision boards to focus on things they want including lifestyle improvements. The financial model of what you want your business to look like is your business vision board. “If you can see it you can achieve it.”

There is more to it than creating a picture twelve months out but that is a key starting point. For purposes of building profits I do not advocate going beyond a twelve month horizon as there are two many variables. However, when doing strategic planning a more forward outlook is appropriate. For now we are focused on building profits near term.