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Why do business owners work so hard for so little reward? Why aren’t more business owners having a great entrepreneurial lifestyle instead of working virtually every hour of business operation?

These are the important questions few self employed business owners are asking themselves. So just what is the point of owning a business if you work long hours for little reward and how can you change it?

There is something you can do and its to focus on one important number in your business and aim to improve it with all your effort and focus of attention. This one number when improve upon can make a dramatic difference to every aspect of your business and lifestyle.

And that number is your Net Profit Margin.

Too many business experts are talking about sales, or profit and not net profit margin. They are all missing the point. Here’s why…

Typically businesses are focused on growth, for growths sake. If they generate more customers they put on more staff, buy more equipment, stock up on products and all their overheads increase proportionally. Sure, sales go up, profit goes up but so do your costs and overheads. Before you know it there’s less money in the bank account after all that wonderful growth and busy-ness but the net profit margin hasn’t budged a percentage point, in fact the vast majority of times it has dropped down.

Look at the statistics for benchmarking, or talk to a dozen accountants and you’ll see the facts – 90% of all SME’s have a net profit margin of less than 10%, so at $1Million in total sales the overall net profit is less than $100,000. A figure hardly worth working 12 months as a business owner to get considering all the stress, responsibility and hard work they have to do for it.

But what happens if you don’t grow for growth sake, just because you have a demand from new customers and marketing? What if you turn demand into profit? This is exactly what you should be doing.

I believe the first goal of any SME is to increase net profit margin to 15%. Whatever it is now, if its lower than that don’t employ more people, don’t buy more equipment, become more efficient. Your net profit margin is a measure of your efficiency of operating your business to show how effective you are with people and time. The more efficient you are the higher your net profit margin will be.

How do you improve your net profit margin?

There are countless hundreds of ways to do this as there are ways to increase sales or profits so these strategies aren’t as easy to find. In fact there are 15 major ones my company teaches, many of which take quite a bit of explaining before business people can understand them. But the best way for you to understand how to increase your net profit margin is to understand a very powerful principle and adopt it with focus and attention.

The only way to increase your net profit margin is to improve everything you do in your business. By improving, not doing what you already do and duplicating it, you can increase your net profit margin. Remember, it’s a measure of your efficiency with people and time. So look hard at how you answer the phone, how you speak to people, how well you qualify your prospects before you spend a lot of time to work out a price or quote, identifying the best way to do the work from all your staff and sharing it amongst them.

The way to improve on every thing you do is to measure every thing you do. All profit margin improvement will come from a number in your business going up or down. So the question becomes, how many numbers are you measuring and monitoring every week? If you’re only measuring monthly, too late, you’re missing the boat, as who can remember what they were doing 2-3 weeks ago? Weekly measuring is the key to profit margin improvement. The more you measure the easier it is to see where your time goes and the more efficient each employee becomes with their time, in sales, production, admin and accounting.

So getting back to the point of this article. If you want a better lifestyle as a business owner and to give up self employment, it comes from having the profit to pay a general manager so you don’t have to work every hour your business operates. With a net profit margin of 15-20% on a $1.5Million turnover the money is there to pay yourself as the business owner, without having to be there, and a general manager. Give them the responsibility of growing your business and increasing the net profit margin even more and then pay them a share of the profit increase. Then you can have the lifestyle you always wanted. Lifestyle is about choices and now you have the choice to turn up for work or go and make real money…

Most people are too busy to make lots of money and have a great life. Making money in business comes from increasing net margins, not from busy-ness. What you focus on grows, so focus on your net profit margin and watch it grow!