21 Ways to Build a Profitable Business


profitable businessI know, I know… I’m so cliched with my ideas of profitability. I mean, who wants to build a profitable business while a bubble is brewing in silicon valley? Just raise boat loads of money on convertible notes, then fill the empty pool in the back of your Palo Alto crash pad with it and jump in. Silly profitability…

But, for those of you not so lucky as to raise $41 million dollars pre-launch (or those so lucky, depending on your rationale) there’s always the boring, old idea of building a business focused on profitability from the starting gate and making money that way. Not as sexy, I know, but the feeling of dollar bills earned vs. dollars given with strings has always felt different between my grubby little fingers.

I’m not saying that lots of company’s who have raised money aren’t insanely profitable – I’m just saying that from the get go you must focus on profitability, letting things like funding just be a building block to your lego castle. So, if you’re interested in building a profitable business while you create the next big virtual startup I suggest you take a gander at these 21 tips that will help you reach profitability and stay there.

  1. Build something great, then sell it. One of the most memorable concepts I took from my time at the Founder Institute was something Phil Libin (CEO at Evernote) said to the class. He explained that the best way to create a great business is to simply build something great and then sell it. Simple, but oh so true. This works like a charm unless you don’t think your product is great (which means it’s time to reconsider) or you think it’s great but don’t know how to sell it (meaning it’s time to become an student of salesmanship).
  2. Go Lean. Building a lean startup (or business for that matter) is a good idea and deceptively simple to implement. Going lean can be anything from using a co-working space, to recruiting your kids to pack boxes of product (see: child labor laws first). Eric Reiss explains it the best in his post entitled appropriately enough The Lean Startup and if you really absorb his message it can help you substantially cut back on the money & time it takes to get to profitability.
  3. No free lunch. As we enter the heyday of Facebook and other mega-social-free sites it’s so tempting to build a company that offers everything ‘free’ and think “I’ll figure out the profit model later”. That’s not a bad idea if you’re one of the few Mark Zuckerberg’s out there or have previously cut your teeth as a successful entrepreneur. But, if you’re like most people and this is your first hoorah rationale suggests you build a business with a clear profit model in place before you even hit the ground running. Note: an example of free and very profitable going together would be the guys from FreetheApps.com I recently did an interview with one of the co-founders and he explains how to make 6 figures a month (of profit) from being “free” – check it out here.
  4. Delegate. You only have so many hours in the day and often the majority of them go to tasks that someone else could be handling for you (think: research, webmaster stuff, organization and other misc. tasks). It’s very important as a scrappy entrepreneur who craves profitability to know how much your time is worth and what you need to be delegating. Say you’re time is worth $100 an hour, if you spend 3 hours a day on email, research, booking trips and fighting with Southwest over luggage they destroyed (happened to me at SXSW) you’re losing $300. Better to delegate those tasks to a virtual assistant for $6 an hour. The benefits of delegation are exponential.
  5. Co-work. Shortly I’ll be on the search for a co-working space in San Francisco… for a few a hundred bucks a month I can get a great working environment (plus all black and white prints my little heart desires) versus spending thousands on an office or struggle to remain on task working out of my house. Another VERY cheap alternative to a co-working space is Starbucks, something I’ve used profusely as a place to work from anywhere in the country (or World for that matter). Free wi-fi, dependable hours and service – all for just a few bucks a day.
  6. High margins. If you’re currently starting a business and the profit margins aren’t high enough, up your prices or consider changing your business model. Struggling through life for 5% profit margins just isn’t worth it and when you make more per sale it gives you options you otherwise wouldn’t have down the line.
  7. Charge more. This concept goes hand in hand with the one above. I always tell my coaching clients if in doubt, charge more. When you have a great service/product you’ll find people who will pay more for it and you’ll earn more = increased profitability. People often charge less when starting out, mistakenly thinking that will rocket their success… simply untrue. Remember my loves, the road to business failure is paved by cheap intentions.
  8. If you’re a nerd find a business geek. Are you a nerd? Does the opposite sex take cover when you enter a room? Do you wear t-shirts that have funny bits of code on them? Do you use the term ROFLcopter in day to day conversation. If so – there’s no harm in it. When you hit it big gals (or guys) will be throwing themselves at you and your awful fashion sense. But you do need to be realistic and find someone who has business savvy to join your team, remember you don’t make sales doing 24-hour hackathons. But while you’re nerding out to Led Zeppelin with 10 other sweaty dudes you’re business person will be out hitting the streets making sales and valuable connections.
  9. If you’re a business geek find a nerd. Are you a business person? Do you hit up networking events like desperate folks frequent singles bars? Do you think Ruby on Rails is the name of a child’s train cartoon or a sexy drink they serve at your favorite trendy dive? If so, never fear, you may not grasp the finer art of programming but you can seal the deal and manage a team. But, don’t scoff at nerds when you see them eyes glued to their computers often forgetting to shower for days at a time. Just because you smell like you bathed in a lake of Old Spice doesn’t mean you don’t desperately need a strong nerd to head up the dev part of your startup. No matter how un-techy your business is at one point in time you’ll need a nerd – so build those relationships now lest when you’re nerdy counterparts become rich and famous they scorn you … you and your Old Spice smelling, hair gel rocking self.profitable business
  10. Talk to successful people. Go to lunch with successful entrepreneurs and pick their brains. This may seem daunting but it’s pretty easy to find friendly folks on Twitter who have actually been there and done that. Many of them will be willing to give you short bursts of knowledge or even sit down for a meal with you (your treat). Take every advantage of listening to smart, successful people in your space and make mental notes of the nuggets of gold they drop on you.
  11. Minimize debt, maximize benefits. Going into debt is never good, but when you’re starting up sometimes it’s hard to avoid. So whether you’re taking on a little capital or maxing out your credit card – aim for the best deals/rates available and you may at least get an airplane ticket out of the deal (or dinner on your investor’s tab). But seriously, be savvy when using credit and keep your debt to a minimum – then when you’re ready to shovel yourself out start reading this guy’s blog.
  12. Become a salesman. Every founder of a profitable business absolutely must know how to sell. It’s not easy either, it took me a lot of reading and watching great salesman to even begin to scratch the surface of salesmanship – but it’s essential and I’m working on it. That’s the number one advice I give to newbie entrepreneurs, before you learn to build, before you set a path, learn to sell.
  13. Pivot often. As this post goes to “press” my company is currently in the midst of a major pivot. We’re absorbing Virtual Zeta into Zirtual.com and expanding our vision – we’re going for the gold baby! But, pivoting isn’t easy and it’s scary as hell. Still, it’s important to be ready to change plans, re-evaluate your startup’s vision and adjust course towards the best possible outcome. Those who can’t change usually sink.
  14. Track everything. It’s very boring and important to track everything as you build a profitable business. This can be simple things like where you’re traffic is coming from (try GetClicky) or complex things like customer retention rates. Track your finances, your page views, your search engine rankings and even your employee’s happiness levels to truly stay at the top of your game… only that which is quantified can be qualified (nerd speak!)
  15. Be a hire turtle and a fire hare. Note: hare as in bunny – not head of. Being a hire turtle means you’re incredibly sloooooow to hire someone unless they’re absolutely mandatory. This is a great trait for a new business since it makes the founder’s work each role themselves before they hire someone on to help out. If you know the role you need to fill backwards and forwards chances are you’ll find the best person for the job the first time and won’t have an issue explaining the position (then gauging performance) of the new¬† hire. A fire hare is someone who realizes an employee isn’t working out and moves fast. It’s not a fun animal to be but it’s essential when running a lean and efficient startup.build a profitable business
  16. Be ridiculously frugal. Clip coupons (virtually of course), live on the cheap (in the beginning) and save where you can. The idea of being frugal during your startup stage should be obvious but people often forget it as soon as they have their first taste of success, I think it’s important to stay as frugal as possible for as long as you can – there’s always time for Dom and Caviar later on!
  17. Focus on scale. Before starting Virtual Zeta I ran a social marketing consultancy, before that I had a jewelry business where I sold on eBay. The reason I canned those ideas and began anew was because there wasn’t a way to scale either successfully (and scale, to me, is one of the most important parts of a running a profitable business). So look at your business model and see if scalability is a simple process, or if it will take reworking the entire operation. An easy way to do this is to ask yourself and your team the question “can we sell 1000 units of X with the same precision and efficiency as we sell 10”, if the answer is no it’s back to the drawing board for you.
  18. Have a solid profitability plan. A profitability plan sounds daunting, but it’s actually rather simple. All you need is one sheet of paper and a pen. Write out what you sell and what you charge, jot down what it takes to make X and how much of Y you’ll get back from selling it. A strong, profitable business should have a relatively simple profit plan at first (you can always go more complex later) that looks something like: sell bananas for $1 each, each banana costs 1o cents wholesale, our banana business overhead is 20 cents per unit sold = 70 cents in profit per banana. Darn, that’s a mighty profitable banana business.
  19. Eat, sleep and breath your balance sheets. In building a profitable business isn’t essential you know the ins and outs of your finances. That means not letting a penny slip out or in without you knowing where it comes from and where it should be headed. This is the boring part of business (at least to me) but the consequences of not having “your money on your mind” are dyer. If you don’t believe me ask Trip Hawkins.
  20. Don’t scrimp on legal/taxes. This point is pretty self explanatory. GET A LAWYER, GET AN ACCOUNTANT… it’ll help you sleep better (when you’re not up at night crying about how much they charge you).
  21. Keep the bottom line on your mind. Whether your at the grocery store, or in the middle of a business meeting, it’s important to always be cogitating on your startup’s bottom line. Sometimes great ideas will hit you at a moment’s notice that could save or make you $$$, but often it’s just being the constant state of profit focus that will help guide your business to ultimate profitability. It’s like chess, the more you think about the possible moves you could make to win, the better chance you’ll have to destroy your opponent and walk away the champion when you sit down to the real game.

Again, this is my humble opinion on building a profitable business – something I’m in the midst of doing right now. A year from now I’ll probably have lots of additional information to add and things to adjust, but for now that’s all she wrote. If you have additional tips on building a profitable business I’d love to hear them in the comments below! Or you can send them to me on Twitter.

  • Jmalad

    this is like an even more terrible female driven version of the whole Tim Ferriss guru crapola, can’t believe it’s come this far but really this crap is like the Ebola virus.

  • http://www.VirtualZeta.com Maren Kate

    I’m sorry – what are you talking about – I’m not even sure what you said? What’s terrible? The writing. The topic or the fact that I’m a chick?

  • Anonymous

    These are great pieces of advice! First time entrepreneurs have such a steep learning curve – it’s awesome to be able to listen to the advice of one whose been through the journey. Things like is it scalable, and having a profitability plan can easily be overlooked.

    You write incredibly helpful and awesome posts!

  • http://twitter.com/financialsamura Financial Samurai

    Maren – I’m experiencing the absolute HORRIFIC pain of a lawyer. The amount they charge, and the time they spend is ridiculous! I hope it’s all worth it… it better be worth it!

    Accountant for a business for sure. Looking at my business model, the profit margins are high if I don’t take into consideration the cost of publishing content and maintenance. What’s my normal salary to be, donno. That’s the interesting cost side of the equation!

  • http://defystatistics.com/ Melodee Forbes

    Another amazing post! Thank you, Maren Kate.

  • http://www.megabizflakes.com Samuel

    Awesome post Kate!
    I agree with your points :) Most especially the #21 point. Yeah, an entrepreneur must learn how to strengthen the bottom line (both inside and outside) Thanks so much for sharing.

    P:S No link to the interview you had with the co-founder of Freeapps. Thanks!

  • http://www.VirtualZeta.com Maren Kate

    Oh snap – it’s because it’s going up later this week – that was my bad :) I’ll link it soon!

  • http://www.VirtualZeta.com Maren Kate

    Aw thanks Melodee :) Remember to email me when you’re ready for that consulting call

  • http://www.VirtualZeta.com Maren Kate

    We should talk (when I’m back in S.F.) about what firm you’re going with – mine is super expensive too – but so far they are very efficient and get things done fast (which I like).

    And you should point me in the direction of a good accountant in S.F. as I’ll be needing a CA one :)

  • http://www.VirtualZeta.com Maren Kate

    Thanks! I’m really glad you liked it :) I need to learn how to put spaces between the numbered lists though – as all the text is hard on the eyes I’m realizing!

  • http://www.todayhaspower.com Rob

    Thanks Maren,
    If this is crap, feed me more of it. I don’t mind learning from a chick (or dude) especially when they have much more experience than I do:)
    I have found myself figuring the profit margin out ‘later’ as opposed to before hand. Thanks for reminding me of the better way of doing things.

    Live it LOUD!

  • http://www.VirtualZeta.com Maren Kate


    Thanks Rob :) I actually found it out late too – that’s why i’m so
    passionate about it now – if that was all I had focused on early on I would
    be so much farther ahead. I want to save other people that same pain!

  • http://www.GenuineThriving.com/ Jeremiah Stanghini

    I think that #7 (Charge More) and #12 (Become a Salesman) are absolutely vital. It really is counter-intuitive to a first-time entrepreneur to sell their product/service for less thinking it will drive more business their way. It takes some deliberate thought to understand that charging more, may in fact, increase business.
    With regard to #12, having the ability to cogently make an argument and then effectively persuade (or at least articulate your point of view) is a priceless skill. Not only is it important for “selling” yourself to clients, but also for entering into partnerships with potential business partners.

    With Love and Gratitude,


  • Fbook

    is it a crap…….. like escaping 9 to 5 and get stuck in this BS. Blah blah… We all can see the light at end of the tunnel but, we cant thru if the tunnel is already block. I am not even in favour of 9T5, but no choice, some how we have to manage. Few person get involved into this type of blander and get some cash by chance or with the help of…….. same ppl like you. These words can fill space at your site but cant fill some one belly. nothing more than A lecture with this and that advice and pridictions. I am out.

  • http://www.VirtualZeta.com Maren Kate

    Maybe you’ve had trouble with starting a business in the past because of grammar issues – in the future it would benefit you to use a basic spell check -lest people think you uneducated :)

  • Thompson

    lol oh the haters. At least he’s gone now, right?

  • http://www.VirtualZeta.com Maren Kate

    haha, it’s funny I never take down negative comments and always respond when
    someone leaves one but they never come back to defend their stance. It’s
    like a drive by … but on a blog … and no one dies …. so I guess it’s
    not very much like a drive by at all :)

  • http://www.VirtualZeta.com Maren Kate

    The salesman thing is always my biggest challenge – but it’s a learning process and I see myself getting better at it the longer I focus on really mastering that skill!

  • http://www.motivationalwhisperers.com/ Dawn Abraham

    Great info. you thought of almost everything. I would had you have to pick something you are passionate about. If you don’t love it, you will never make it past the hump to success. Yes people don’t like to talk about that but there is a hump it’s at that 6 month to a year. If you can make it past that you will start to see the light of success.

  • http://www.tonergreen.com/Brother-DR110CL-Drum-Unit-Remanufactured-p/bcldr110.htm Brother_toner

    Those are great ways to build a profitable business. I have an online business which I strive hard to become profitable.

  • http://twitter.com/MSWwireless MSW Wireless

    These are great. Thank you for sharing!

  • Sharma Rajendra

    thanks lot dude !

  • Bo Schaefer

    Not as sexy, I know, but the feeling of dollar bills earned vs.
    dollars given with strings has always felt different between my grubby
    little fingers.