Get them both right and you will have a profitable and successful business!
Get either of them wrong (or both!) and you will go out of business.
When you think about it, business is just a case of providing a product or service at a price which covers all your direct costs of delivering that product or service AND has sufficient additional profit to cover your other ‘operational’ expenses and leave some over for you to draw a good salary.
So why do I see so many business owners running “not for profit” businesses. That is, they keep a bunch of people employed and provide a valuable product and service to their clients and then have nothing left for themselves – or in some cases they are even tipping in extra cash of their own to perpetuate this situation!
Usually the cause of the problem comes down to getting the math wrong or the psychology wrong! What do I mean?
By ‘math’ I mean the numbers in the business. It starts by getting the price right. To get the price right you need to know very accurately what your costs are! This is the starting point. Until you know how much it is going to cost to deliver a product or service, how do you know what to charge? I see so many business owners setting pricing based upon what other businesses charge (competitors) or what they ‘assume’ clients will pay. This is not a good way to create a great business. In addition to the direct costs of course, you need to take in to account your operational costs and your own salary! When you know your numbers you will know your breakeven point and from there you can strategise your pricing.
The ‘psychology’ in a business is the marketing and sales systems and processes. I used the words ‘systems and processes’ deliberately. Sourcing leads following them up and converting them in to deals should be a system and process.
To learn more about building your business to have the lifestyle you want and deserve by getting the business to run without you having to be there, consider applying to join one of my mentoring groups or contact me for ther options. Visit my SERVICES area of the web ste for more information.
In summary, here is a slide from one of my recent webinars;
I hope you enjoyed this blog post. Please feel free to add your comments below!