Growing OUT OF BUSINESS
Why do businesses go out of business? (Maybe they give too much away).
I’m standing in the grounds of an abandoned amusement park, strangely enough. (Hopefully Old Man Jenkins doesn’t come chasing me!)
This is a place that I used to come to as a kid, and as you can see now, it’s clearly out of business and over-grown. And I’m always curious as to why these things happen. Why do businesses go out of business?
I was thinking about something that a business owner said to me a week or so ago…
One of their suppliers told them to drop their price by about $800 on a $2000 item, and just sell more!
Because it would be more attractive to buyers. But when we ran the numbers, they would actually have to hire another staff member and get another vehicle on the road, just to service the projected demand, just to stay – profit wise – where they need to be if they didn’t discount!
So the concept today is Growing OUT OF BUSINESS. I want everyone to be really careful about this.
We’ve got to protect our margins
Otherwise, we could end up doing more and more business for less and less money, requiring more and more resources, and more and more time. One of the major reasons businesses fail is business owner burnout. They try to do too much, and often for too little money.
What are a couple of the key things we want to make sure we always do? One is going to be “Sell on Value”: Be really clear on what your uniqueness is in the market. Why are you better than your competitor?
If your customer can’t tell you apart from your competitor, then all they have to compare on, is price. So we’ve got to make sure that you’re really clearly differentiated from them.
The other thing, is be really clear on what value you bring to the client, so that they are a hundred percent sure you’re the best fit for them. That they really feel that you’re the absolute best choice. That way, they’re not going to be worried about how much you charge. You can charge a bit of a premium, protect your margins, and make sure your profitability stays where it needs to be.
Deliver your service efficiently so it doesn’t take a long time to earn the money you need to earn
The second thing is understanding how long does it actually take you to deliver your products and services? You can have a product that has a great margin, but if it takes you a really long time to do it, you can run out of resources, need to hire more people to do the same amount of business. So you want to be sure that the work that you do can be done fairly quickly, as well so that it doesn’t take a long time to earn the money that you need to earn. It’s called your Common Economic Denominator.
So. Looking around, we had a wave pool over there – that’s that graffitied old building. I’m standing on the waterslide. There’s a go-cart track, and there’s a roller gardens thing over there. But it’s all gone. Don’t know why. Could have been the marketing, location, or could have been their margins. Maybe they were giving too much away.
Think about your business. You don’t want to end up like this park. Where do you need to go to work on your business to protect your margins, making sure that you’re clearly unique to your best target market (the people that really love you). And make sure that, with the work that you do, you can get it done in a reasonable amount of time so you can make the profit on your jobs quickly and easily.
That’s it for this week. Gasp! It’s Old Man Jenkins! I gotta go.
ps: Learn more about how to improve your profits without discounting: Click here and Register for my upcoming Workshop in Burlington Ontario:
“6 Steps to Business Success for Business Owners”