Making a profit in a small business involves bringing in more revenue than it costs to provide your products or services. Many business owners dream of coming up with the next big idea that becomes a household name and generates insatiable demand. But most small businesses are built on patient attention to nuts and bolts, such as creating quality products and finding price points that are mutually advantageous to your business as well as your customers. Earning a profit also involves careful attention to bookkeeping in order to spot potential problems before they become insurmountable obstacles.

The Business Model

A business model is an overall concept of what your business will provide, which customers it will serve and how it will generate income. A business that is built on a smart and carefully planned business model increases its odds of earning a profit by building a company that is aimed at profitability from its outset. Research your business model before starting your business, incorporating information about competing products, consumer price expectations, cost of materials and infrastructure, and potential threats.


Revenue is the amount of money that your business earns in exchange for products and services. Increasing revenue will help you to increase profit as long as it does not cost you extra to produce more, such as if increased production creates bottlenecks. In many cases, increased production for increased revenue can also improve profitability by creating economies of scale, or efficiencies that lower the cost per unit as you produce more units. For example, if it takes you an hour each day to set up your machinery, then your labor costs will be lower if you produce 100 units each day than if you produce 10 per day.


Businesses can also improve profitability by lowering expenses and increasing their net earnings after subtracting expenses from revenue. To lower expenses, carefully research the cost of each item your business uses, looking for options of comparable value and lower costs. Evaluate your payroll expense, looking for situations where you may be overstaffed. Increase energy efficiencies to save money on utility bills. Find a cheaper facility to rent, as long as location isn't crucial to your sales.


Your company's profit margin is the percentage of gross sales that it earns in profit. For example, a business with $100,000 in sales and $30,000 in profit will have a 30 percent profit margin. Although a $300,000 business with a 10 percent profit margin will earn the same amount of profit as a $100,000 business with a 30 percent profit margin, the business with lower sales and a higher profit margin is better positioned to earn more profit as it grows.

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