Working in the Business vs. Working on the Business
Updated: Apr 21
Why do some business owners enjoy tremendous success while others fail miserably? Why do certain business owners feel in control of their business while others feel controlled by their business? Why are some business owners able to drive their business forward with relative ease while others feel driven by their business?
How to make your small business profitable
Sobering statistics: According to the Chamber of Commerce, only 40% of small businesses are profitable. Of the remaining 60%, half are breaking even, and the other half are losing money.
So why do so many small business owners feel like their business is running them instead of vice versa? Why the poor profit numbers? There are many reasons, but one stands out. I believe it is the difference between working in your business and working on your business. Michael Gerber, in his classic work The E-Myth, writes that many people go into business because they have a skill or talent they think they can monetize. They think their knowledge or experience is enough to carry them to attractive profit margins. Somehow all the tasks will get done...
Business owner wakeup call
Wakeup call! After a business is up and running, the challenges of bringing new customers consistently thru the front door while keeping those same people from exiting out the back door due to inadequate service, becomes a harsh reality and weighty challenge.
For a while, you can keep all the “plates spinning” but without a clear operational process in place that works on the business, it’s just a matter of time before the cracks start to surface in the business itself, business owner(s) and the staff’s lives.
Daily (10 – 15 minute “huddles” with direct reports), weekly (leadership team meetings), quarterly gatherings ((includes all staff and owners for a on-track/off-track discussion on the key business components) and annual meetings (owners/partners plan for evaluation and planning) will address issues in a timely matter and keep everyone rowing in the same direction.
Processes are key to generating more cash flow
Anyone who has been in business even a short amount of time comes to the realization that the business cannot run itself. Issues arise nearly every day that need to be dealt with in an intentional and effective way by the appropriate people. “Throwing” more personnel at the problem will not solve it or relieve the stress. An operational system must be installed that creates a rhythm of communication among everyone in the organization involving the right people at the right time.
Strong leaders & teams make more money
It begins with you, the leader. Assess each team member to see if they “get it,” want it, and have a capacity to do the job. The goal should be getting the right people working in the area of their unique ability for 80% of the time or more. Getting the right people “on the bus” and sitting in the right seats is paramount. Doing this will help a small business increase profits because it has a more effective team.
Understand your values
Clarifying your business’ mission so that everyone knows what they are aiming at and how their role contributes to accomplishing the overarching mission is vital. Identifying the core values unique to your organization will make addressing issues among team members easier and allow you to make decisions on significant opportunities much quicker. Ask yourself, is this decision under consideration in alignment with our core values or not? If not, move on. (See Resource tab on the Solas Wealth website for an effective Decision-Making tool we created for your use).
Perfecting the steps to success
Part of the brilliance of the McDonald brothers was they systematized all the primary functions of their hamburger business so that an excellent product could be delivered consistently. Identify the primary activities that make your business run.
Ask yourself, “If this activity were done to perfection, what’s the first step that needs to take place? Second step? Third, etc.? Those steps need to be documented and followed by all. This way even the person who must “fill in” knows exactly what is expected and how to do it.
Dive a little deeper
If you would like to dive deeper into the operational aspects of your business and get the free tools you will need, go to eosworldwide.com and learn more about the Entrepreneurs Operating System. We have used it for years with fantastic results.
Honestly, for a while it will seem like you are working a second job as you implement these various steps, but you will wake up one day and feel the satisfaction of your business working for you rather than against you.
Clear the clutter
Fans of the popular television show The Profit have learned that a major factor in the investment decision is analyzing the sales to cut items that contribute no meaningful value at any particular moment to the profit. The results can be used in sales evaluations of dozens of square meters of merchandise or categories to identify the top and lowest performers and help businesses sell more easily and efficiently”. Raleigh says. And just as clutter can be difficult at home, it can be difficult at work. Regardless of what your service offers, they waste time. Tell me about the situation.
Maximize profit margins
Profit margin is critical because it demonstrates how much of each dollar of revenue flows to the bottom line. It can assist in promptly determining price issues. Additionally, price mistakes can wreak havoc on cash flow, jeopardizing your entity's continued existence. without a good profit margin you will always be playing catchup.
Understanding your industry is critical for understanding whether you are achieving the desired profit margin. For example, profit margin in the restaurant business are often less than 10%. However, in the consulting business, profit margin can be as high as 80% or more — frequently surpassing 100% to 300%.
On the other side, restaurant profit margins are often razor thin, ranging between 3% and 5% for a healthy operation. As a result, the industry in which you operate is another determinant of your profit margin.
Remember the equation: Profit = income / expenditures? As well as boosting revenue, you can reduce costs in order for your company's profits to improve. Check out your finances for a quick solution.
A useful exercise: Check all the business accounts every day for at least 1 month. You might be surprised at what you pay for, and how much more money you could save. Refinancing company debt or improving the contract terms may help reduce costs and increase revenue. Something so simple that 0% balance transfers can help increase your business marketing and sales revenue.
Conduct a cash flow analysis
According to many people, the numbers are not true. Using cashflow analysis to monitor cash flows is critical to maximizing profitability and maintaining stability for businesses. Managing cash flows provides an analysis of costs to determine how businesses earn money. Can you start an analysis of your cash flows? Your accountant can be a good source of information to get a better grasp on your data. It may also be possible to get FREE guidance on growing a business through SCORE mentors and local business development centers.
Make sure you are marketing
Social Media Marketing
Social media marketing is appealing to firms seeking to retain a healthy profit margin, as the costs associated with this type of marketing are only assessed in time. Social media marketing may be done on a shoestring budget, while businesses can invest thousands in a more immersive campaign if they so want.
The inclusion of social media analytics also simplifies determining the performance of these programs. You can observe how many people engage with your posts and how many clicks each one receives.
Profit margin is raised as a result of firms being able to customize future postings to these facts. Having a competent organization manage these services enables a business to boost its profit margins while decreasing its initial cost.
Email Marketing Campaign
When properly implemented, this method provides the maximum potential return on investment. Indeed, two-thirds of all organizations consider this as their most lucrative marketing tactic. This is owing to the low cost of sending e-mails. These expenses are minuscule in comparison to those associated with other solutions.
As a consequence, your profit margin improves tremendously. As your contact list grows in size, the efficacy of these efforts will rise as well. Businesses who take the effort to obtain an opt-in from their target audience may amass a big list of potential consumers at a minimal expense. Profit margins expand, since e-mail marketing's cheap costs are only matched by its capacity to expand profit margins.