All business is good to win, right?
Many small business owners believe that they should grab any piece of business that they can. That you should never say ‘no’ to someone wanting to work with you or buy your products.
It’s one of the great misconceptions. And it is, simply, dangerous to your business’s health.
Not all business was created equal. When you’re starting out in business, getting any piece of work often adds up to profitability. That’s typically because you don’t have any ‘infrastructure’ – it’s just you. But as you add staff and premises and other costs, a lot of that wotk ceases to be profitable.
Many business owners have an absolute focus on increasing their revenue. But at the end of the quarter or year, they look at their financial statements (or worse, bank statement) and ask, “Where’s all the money gone?”
Knowing when to say ‘yes’ to new opportunities is a concept that we will talk about in greater depth later in this blog series. For now, let’s focus on why unprofitable work is so harmful to your business and why you need to coach your business to grow profitably.
If it costs you as much or more to provide a product or service than the revenue you earn, you’re tracking sideways or losing money. Obvious stuff. What is less apparent is why a seemingly ‘great’ opportunity turns out to be indifferent or worse?
The answer often lies in a business that inadequately understands:
· What value its products or services provide
· Who are the customers who will most benefit from them?
If you’re selling your products to the wrong people, they won’t value them appropriately. You will undercharge to win the sale. Or over service the client in the vain hope that they will understand the value of what you’re providing. Both options lead to dissatisfaction for your customer and for you. Worse for your business, both options eat into the profitability of the revenue. It quickly becomes unprofitable.
Contrast when you clearly understand:
· What problem your product or service solves
· How to identify and target customers who will value that problem being solved.
In that case, you are confident in pricing appropriately and your customer will happily pay for something that provides value to them. This is profitable business in every sense.
The challenge is to coach yourself and everyone in your business how to correctly identify profitable business and avoid unprofitable. If you’ve got more profitable work than unprofitable, you’re ahead of the game. If you eliminate unprofitable work, you’re winning the game of profitable growth.