We are pleased to offer you insights from business expert Steve Wilkinghoff, author of the bestselling book, Found Money – Simple Strategies to Uncover the Hidden Profit and Cash Flow in Your Business. And we are excited because we have convinced him to present a webinar for NNEP members on January 8, 2013!
Get a feel for Steve and his approach to growing a profitable business in the following guest post:
Are You Relying On BAD Profits?
There seems to be increasing competition everywhere these days. The first reaction most business owners have to competition is that it’s a bad thing. But what if the increase is a simply a sign that the market is growing – more people interested in harnessing the power of promotional items to improve their business?
As any market grows, there is room for more participants. And the overall growth results in an increase in the total potential customers in the market. That means you’ve got even more room for you to produce better financial results.
But there is a caveat to that statement. No matter how many customers you may attract, you won’t produce better (which includes more stable) financial results if you have been relying on BAD profits.
What is a BAD profit? Is there such a thing?
To steal a line from that famous movie (and since it is the Christmas season), Yes, Virginia, there really is a BAD profit.
BAD profits are incredibly dangerous to the long-term health of your business. Dangerous because they often one of the biggest contributors to sub-optimal, and unpredictable financial results.
BAD profits are created by customers that, even though they are currently buying your services, are either not fully satisfied, or simply feel like they aren’t being fully appreciated.
That type of customer creates BAD profits for your business, not because there is anything wrong with them, but because there’s something wrong with your business. The profits from these customers are only short-term. They can (actually, they will) literally disappear overnight if a new competitor (or old competitor) comes up with a unique way of making them feel valued.
BAD profits are an axe hanging over your business. And the axe is being held up by a thread. The slightest bump (a new competitor, a new move from an existing competitor, and any other disturbance in the market or the economy) and the axe falls. When the axe falls you see your business and your profits quickly chopped into a much smaller entity.
BAD profits are easy to ignore. It’s easy to make yourself busy dealing with the customers who phone in, walk in, and currently buy from you.
But it’s hard to stop and ask yourself if any of your current customers are at risk of leaving. Leaving because a new competitor arrives or an existing competitor makes some new moves in your market.
Sooner, or later, however you will be forced to recognize any BAD profits your business is currently creating. When something happens that encourages those customers to leave your business for another one, you will start to see your financial results suffer. And then, if you haven’t thought about them before, you will be forced to look at your BAD profits. The problem is that, when you are forced to look at BAD profits (once you’ve already lost the customers and profits) it’s too late to do anything about them. Both the customers and the profits are gone.
That’s usually when the blame game starts. Common comments that indicate you’ve been hurt by BAD profits include, “We just can’t compete with the big guys”, or “Customers don’t appreciate what we do anymore”, or my favorite, “All people care about these days is a low price.”
So don’t ignore BAD profits in your business. Don’t wait around until you are forced to consider them. Instead take a look at your customers and your business right now.
Ask yourself the hard question. Do you have customers who are just waiting for something better to come along? If you are like most business owners your honest answer will be “yes”.
And that’s not really a problem. Just don’t ignore it. Develop some tactics and an action plan to deal with any of your BAD profits today. You never know when you will be forced to do it otherwise.
Steve is the author of the bestselling book, Found Money – Simple Strategies to Uncover the Hidden Profit and Cash Flow in Your Business. You can download a free chapter of Steve’s book, or useful articles and tools you can use in your business by visiting www.foundmoneycfo.com