The obsession that business owners have with sales often confounds me. Don’t get me wrong, I love a profitable sale as much as the next entrepreneur, and there are few things more euphoric than closing a big deal. But I sit on the operations side of the equation. I see too many business owners in zealous pursuit of bigger campaigns, more sales, and greater revenue at the expense of the quick cash they can access by controlling their expenses. There are piles of money being left on the table because entrepreneurs dazzled by the glamour of revenue overlook the simple basics of the entire profit formula.
DOES MARKETING & ADVERTISING PAY YOU?
Running a successful advertising campaign can be like flicking a money switch. If you get the right offer in front of the right people at the right price, it can feel like you have struck gold. Yes, marketing wins will spread your brand story far and wide, and yes, great advertising will have money rolling in … but do you get paid from these results, or do other things come first?
DO SALES PAY YOU?
The connection between sales and profit is obvious. Without sales-generating revenue the business has no cash flow whatsoever, making it impossible to make a profit. Perhaps this is why business owners are obsessed with making sales. It certainly is essential in business, and it is the sexy ‘feel-good’ part of trading every day. But sales alone do not a profitable business make.
DO YOUR STAFF PAY YOU?
Your team are pivotal to your business success. Without them, the site isn’t managed, the admin isn’t working, books aren’t balanced, customers aren’t served, and orders aren’t filled. You need your team, dare I say it, almost more than they need you. You pay them a handsome price for their contribution. The amount you pay them comes directly out of what’s left for you … do they leave you with enough, or could they be generating more for you?
DO YOUR OVERHEADS MAKE A PROFIT?
Just ask the business owners slogging it out in the trenches of excessively high expenses. Overheads do not bring profit, they consume it! I know first-hand what it feels like to be generating millions, and having it all consumed by operating costs. Revenue generated by sales can only make a profit to pay you if you have some of that sweet cash left over after everything else is said and done.
WHEN DO YOU GET PAID?
While it is important for a business to solve problems, bring value, serve customers, and make a difference in the world, these things are only important in business because they all lead to the holy grail of profitability. The primary purpose of a business is to maximise profits for owners or shareholders by serving their customers. You will do this by making sure that the money coming in through sales and advertising is not wasted by poor performing staff, inefficient processes, or excessive overheads. It might seem elementary, but it’s the area of management most overlooked by business owners. Running a tight ship with streamlined processes is the only way you can maximise the amount left over for you.