Every business needs to make a profit, we already know that, but when should that profit be measured?
And as for many questions, the first response is “That depends”.
It depends upon why you are measuring the profit.
Ideally, and unless you can afford to run “loss leaders’, every transaction needs to deliver a fair profit. That is a sales price that makes it worthwhile for the business to sell it, and that makes it a good deal for the person or business buying it.
A successful business also needs a longer term perspective. There are bills that only need to be paid after a longer period – rent is maybe weekly or monthly, suppliers often provide monthly accounts, utilities might only need to be paid every quarter, and some memberships or licence fees are due on an annual basis.
So your measure of profit has to take into account a longer time frame than just a single transaction. Your sales price has to cover the cost of acquiring what you sold, plus a contribution to these other costs of doing business.
That’s all probably stuff you’ve heard before, but have you heard of behavior being a measure of profit? Before exploring that, let’s take a step back and agree on something: What you do today will build the world you live in in the future. Taking it easy will not provide you with a nice house and car. Managing your money, taking control of your finances will be more likely to do so.
The point is that behavior that your market disapproves of will eventually cause the business to fail. It may survive on past glory for a while, but it needs to truly serve the needs of the market or it will eventually fail when people stop coming in to buy, and that makes a big difference to your overall profit position.
Think of it this way: if you don’t truly serve your market they will go to someone who does.
What business issues do you think other business owners would be interested in? Let me know in the comments section.
That is a question that very few people ask, and it has two meanings. Both of them are important to you if you currently operate a business, or plan to.
There is truth in the saying that “You only ever sell yourself”. That is, building rapport with your client/customer is the first step to making an eventual sale. It follows that you have to be ‘saleable’. Your knowledge of your industry and product, your appearance, and your behaviors all contribute to the level of rapport you are able to build. Do you know what you are talking about, and can you explain that to your non-expert client? Are you dressed in an industry- and location-appropriate manner? Normally doctors don’t wear hi-vis clothing and work boots, whereas a building contractor probably should. (And would you trust a building contractor with a stethoscope around their neck the way you trust a doctor wearing one?)
Do you stand by your word? Does your market believe what you say? If not then you are giving them reasons to not buy from you.
Then of course there actually has to be a viable market that you can connect to and influence. That influence has to encourage them to buy from you instead of some other business, otherwise your business will slowly (or maybe not so slowly) just fade away.
What are your answers to these questions? Are you earning your market’s trust and influencing them to buy from you? And if not, why not?
There’s another question that is also important about now: Why should I care? The answer to that is relatively simple. You can build a long term, sustainable business and secure your future, or you can head for the ‘dark side’ and not always do what is best for your clients. The dark side leads to a ‘feast and famine’ cycle where you need to restart the business every so often, which eats into your profits, and eventually can cause the business to fail. The ethical approach, by comparison, maintains good relationships with the people making up your market, which maintains your profit level.
The ethical approach means that your income planning can sit on solid ground, the other way means that you always have to hope that people don’t find out your secret.
More on this topic later, and let me know you agree or not. I’m also interested in what you’d like covered in the next post.
I recently watched “Pirate Radio” (AKA Boat That Rocked) again. A good fun movie that tells the story of a pirate radio station off the coast of England in the 1960s. If you’ve seen it you’ll notice that they all seem to be having great fun, and that made me think about being in business – and having fun.
Many people will tell you to keep emotion out of your business. They are nearly right.
There is a serious side, and that is to deliver the quality and quantity that your client’s expect, and to require an appropriate reward for that. Keep good records and measure what is going on inside your business.
The thing is though that you must be as passionate about your business as the Pirate Radio guys were about theirs. Being in business can mean long hours, at least to start with, and it can mean being away from home for extended periods, and all sorts of lifestyle concessions, so if you don’t enjoy it then it will feel like really hard work.
And you can’t hide that from your clients! You have probably experienced being served in an off-hand way, and decided not to do business with that store again? Your clients are just as good at figuring out if you care about your business, and if you don’t care about your business then they figure you probably don’t care about them.
If you are passionate about what you do for a living your clients will know, and that will rub off on them! There will be a mysterious ‘X’ factor about your business that competitors will not be able to mimic.
Another way to look at it is: you are likely to be earning a living for a long time, it might as well be doing something you like! If not it will seem like a very long time indeed.
A business owner or manager must have an extensive business education, and be able to apply that education at a moment’s notice. Being in business without knowing what you’re doing is most likely to be an expensive pastime. Having an education without applying it is an indulgence.
Most mentors, managers and advisers will give you plenty of knowledge that they have gained over their career, and some will tell you what you could have or should have done in given situations. We’re different, we want to tell you what to do before you need to do it, and tell you in a way that is easy to bring to mind.
We want you to be able to bring the lesson to mind during the time when you need to apply it, after all that’s the point of knowing something – to be able to employ it.
There are many ways to ‘anchor’ thoughts in your mind so that they can reappear when you most need them, and we will use several in this site. Some we will explain, others we will just employ to best effect. The end result is that you will learn what you need to know and be able to employ it just when you need it.
One technique we use is to use words starting with ‘P’. Yes, other people have done this, but we have more words than the others, and we imbed them in your mind more effectively than they do. The way we do it you will be able to bring the concepts to mind any and every time you need them.
In previous articles we have already mentioned profit as an important word, and one that is important to your business. If you haven’t read our entry on that please take a moment to read it now.
From that article you will know that a potential client’s problem is important, so is your promise and your proof. Get them right and you will reduce your need to compete on price. Notice all the words starting with ‘P’? Make a mind map that connects these concepts in a way that makes sense to you, and that will make them even easier to recall.
Look for articles in future that take either a concept (like Publicity) or a subject (such as Performance) and provide you with a concise, easy to recall story that will be useful every time you need it in future.
We told you about the ‘P’ device to make things easier to recall, to bring back to mind. Did you notice the other techniques that are also employed here? It doesn’t matter (though we’d be happy to get your feedback) if you didn’t consciously notice them, they are there and they work. You’ll become aware – if you aren’t already – when you hear someone use a trigger word and your think “What was that ‘P’ word again”?”