3 Reasons Your Business Is Not Making Enough Money
Since 2007, I’ve worked with businesses of many types, and I’ve found one complaint to be universal: “We need more customers!” While many businesses are struggling due to lack of revenue, I find that the reason for the shortfall is often not what the owner thinks it is. Businesses that are desperate to increase revenues most often try solutions that make the problem worse. For instance, a business might throw thousands of dollars at an advertising campaign and receive little or no response, creating a more severe cash shortfall.
One of my favorite business books is Great by Choice. The author, Jim Collins, recommends “firing bullets before you fire cannonballs.” The basic idea: test your theories before you commit all of your resources to an unproven idea. When “survival mode” kicks in, we tend to feel the pressure to make something happen quickly. We tend to resist doing anything that will take time, because we don’t have time. During times like this, it’s important to fall back on proven and effective strategies for getting through the crunch.
Without the right disciplines in place, it is too easy to overlook the obvious. It’s often easy to see the fallacies in our thinking in hindsight, because emotion no longer clouds our judgment. It’s much harder to achieve that level of detachment in the moment, but it can be done. It begins with training yourself to look in the right places when a crunch hits (rather than looking where your instincts direct you to look). Here are three common problems that I have observed time and time again. In my experience, business owners tend to resist dealing with these problems, even when they are doing serious damage.
You have too many of the wrong customers.
When cash flow is tight, the tendency is to grab up any and every opportunity to bring money in the door. While it may seem to make a certain kind of sense, it can be suicide. In many cases, business get into a financial bind because their time and resources get tied up dealing with demanding and unprofitable customers. To make matters worse, good customers start to leave. If you are feeling financial pressure to bring in more sales, take an honest look at your current customer base and ask yourself how many great customers you currently have. Odds are, your best customers are probably getting the least amount of attention. This pattern is demotivating and will make any business bankrupt. This is why slashing prices can often backfire.
Your star player is stealing from you.
When a three-alarm fire is burning hot, it is easy to say, “We don’t have time to think about efficiency. We just need to Get It Done.” Dishonest employees thrive when this kind of mentality prevails. If people are running around like chickens with their heads cut off, the business is usually one misstep away from an irreversible disaster. In these situations, the business is at the mercy of one key person who has most of the critical information memorized. If that person becomes sick or injured, or quits, an acute crisis can quickly develop. Worse yet, if your linchpin team member is dishonest, the cash crisis may be the direct result of activity like theft or padding of time cards. Businesses that lack the appropriate level of accountability usually do not detect dishonesty until the situation is well out of hand, but the most common warning sign I’ve seen is a negative attitude. People who deliver more excuses than results are usually dishonest, because that’s the end result of laziness. In addition to leeching money from the business, thieves have the tendency to repel good customers and attract bad ones.
You’re neglecting (or abusing) your professional network.
Most often, the solution to business challenges is simpler than it seems, but we can’t see it clearly when we’re in the middle of it. Your peer professionals may be able to bring new perspective and help you identify new approaches or opportunities. Most of the time, thought, the tendency is to waste this valuable resource in one of two ways. Some business owners may ignore their networks and avoid asking for advice or help, either denying that the problem exists or insisting that they can figure it out by themselves. In more severe cases, I’ve seen business owners pressure their peers to buy products or services they don’t need, or ask for introductions in an unprofessional or inappropriate manner, which can burn bridges or alienate personal friends.
When the pressure is on to make sales and do it quickly, we have to resist the primal urge to do what seems like the only logical thing to do. When it feels like we need to make snap decisions and act fast, we often need to slow down and step back. It’s the difference between reacting and responding. Reacting without thinking usually makes the problem worse. Responding is the art of pausing and waiting for a moment of quiet to come. When we slow down the chatter of our minds, we begin to see the next single step in the right direction. Instead of trying to solve the entire problem in one fell swoop, we can extricate ourselves from a bad situation by solving one tiny problem at a time. This approach has never failed me. I’ve found that when I force myself to stop the madness and take small steps, my thinking gradually becomes clearer and new solutions present themselves. Gradually, I begin to see a more accurate picture of reality and I realize that things are not as bad as they seem.
If your business is in crisis mode and you need to find solutions quickly, click here to schedule a confidential 20-minute phone consultation at no cost and with no obligation.