(Businessweek) — Too many small business owners are focused on making payroll, not profits, says Patricia Sigmon, founder and president of David Advisory Group, a Manhattan consulting company, and author of Six Steps to Creating Profit (Wiley 2010). Sigmon, who also founded and still owns a $2 million, 10-employee computer consulting business, LPS Consulting in Fanwood, N.J., spoke to Smart Answers columnist Karen E. Klein recently about boosting profits in small businesses. Edited excerpts of their conversation follow.
Why do many small businesses lag in profitability? The No. 1 reason is small business owners don’t have the answers in hand. They have no idea that they didn’t make a profit, or that they had a loss. They are chasing payroll money every month, they’re getting deeper into debt, and then they have one bad month—and they’re dead. Too many small business owners don’t know the difference between “busy” and “profitable.” Small businesses that wait until the end of the year to look at financial reports can lose a lot of money being “busy”—especially in a recession.