Recently I was talking with a client and they were talking about their future plans.
We discussed competition, where he has grown his business from and a whole bunch of other stuff. He really laid quite a lot on the line – he knew that he needed help. Not only did he need help, he needed the right help.
If you looked in on his business, it was successful. He had a very nice premises. It seemed busy; there were good margins on his products and services. He was adding more staff to the operation.
Now they weren’t without their problems. There was increasing competition in their area. Within your competitors there is always one in the every market, with the bright idea that they should cut prices in order to grab a larger market share.
There he was, more competition than ever, the mob chasing his customer base getting ever larger. It becomes harder and harder to maintain prices during a discounting war. But thankfully he was willing to do it.
He knew he had two challenges because of the expansion: He needed a larger customer base and he had gotten much bigger over the past couple of years but he hadn’t become more profitable.
This is far too common a problem, businesses get bigger they don’t necessarily get more profitable. One part of the problem can be pricing the other is that they neglect a major profit centres right in their own back yard.
The reason this is so important is that turnover doesn’t necessarily mean more dollars in your pockets. It doesn’t mean more profits. Dollars in – dollars out = profits.
Some of those profits should be going into your back pocket. Regardless of your ambition level if you are in business for any reason other than to own your own job, you need to be putting those profits into your back pocket.
For example – if you can create a surge of $25,000 in additional net profits four times a year, that means you will bank an extra million dollars in the next decade. (This is extracted from a case study for a single location mechanic’s business. One campaign, easy to do.)
Barring striking gold, or winning the lottery, the highest probability path to financial freedom is actually getting rich slowly, systematically, developing assets that will continually put profits in your pocket.
There is a reason that the richest man in Babylon saved 10% of his income every week.