Are you putting lots of time, energy and effort into your business but not moving ahead financially?
Then you could be working hard and going broke.
The sad thing is that this story is all too familiar for small businesses especially in the first five years. Many just try and work harder and harder trying to make it all work but they often fail to address the root cause.
If you feel this is you, then start to look at the following common reasons why this happens…
1) Not understanding your profit margins.
Sales and profit are not the same. You can be generating sales but is it enough to cover the needs of your business? Out of each sale you make or job you do there are several things you will need to pay:
- This could be GST, income tax or withholding tax;
- Any stock, materials or consumables;
- Wages and labour costs;
- After all this, what’s left over needs to start paying the business overheads – things like insurance, cars etc
And if all goes well there will be profit left over to pay you as the small business owner.
If you don’t understand the actual true margins in the work and jobs you’re doing then you can be working hard and the money’s coming in, but there just isn’t enough to pay everything that needs to be paid.
Like one of our customers who is an air conditioning contractor. When he sat down to work out his true margins on his top types of jobs, he discovered he was losing $50 each time he did a particular type of installation. The crazy thing was this was his second most popular type of job – so he was doing a lot of them. He would have been better off paying someone $50 and not doing the job and getting his time back!
This thing can happen all the time if you are not across the margins in your business.
2) Being busy on the wrong things
Ever had a day where you get to the end of the day and ask ‘What have I achieved?’. Or get to the end of the week and feel you never really got on to what you wanted to that week.
Chances are you have been busy on the wrong things.
This is like being in a pinball machine bouncing around each day reacting to everyone else’s demands on your time and your business…. And it can be exhausting.
The key to overcoming this is to start planning your day and planning your weeks so the important things get done. By proactively putting the most important things into your day and into your week you’ll start to get more done.
That way you’ll get ahead in your business rather than just react and work hard playing a game of catch-up all the time.
3) Having the wrong type of customer or jobs
Not all jobs and customers are created equal. Which of your jobs have more margin in them? What customers are the easiest to deal with? Are some more demanding? Do you find some jobs more problematic?
Start being a little more discerning with the jobs and customers that you take on.
Like one of our customers Joe who runs a hire business. He was having a lot of time being wasted with the wrong types of enquiries. These were customers who would never go anywhere, and he had a lot of time in his day being chewed up. Joe completed a mission which helped him make a few changes to his website and by doing this he started to eliminate some of those calls coming through. Joe was then able to spend more time with the right type of jobs and focus on the ones that would move his business forward.
The key with all these three areas is to break the cycle of busyness and take some time to start working on your business. By looking at these areas systematically every week you will really move ahead.
At Biznostics we suggest, to allocate 10% of your working week to work ‘ON’ your business. For example, if you’re working a 40-hour week you should invest 4 hours ‘ON’ your business. In this time you should work on things like looking at your margins, planning your week and making sure you’re getting the right type of enquiries.
That way you’re going to move ahead. You’re going to free up your time. You’re going stress less and be in control of your business.
And best of all you’ll get a great return for all the hard work you are putting in ????