The One Thing Your Business MUST Have
I was listening to the radio when some economists were discussing the U.S. and the global economy. One said “you can’t fix the economy long-term by raising the debt ceiling OR by cutting spending. You have to expand business and create jobs.”
As you know, I don’t talk about politics or religion in this blog and I’m not about to start now. In fact, it doesn’t even matter whether or not you agree with the economist. But, it does have a lesson for us.
I want to bring that statement back to YOUR personal economy… the one you live with. To do that, though, I am going to take his comment and apply it to your business (ignoring politics.)
In your business, even though spending in a cost-effective manner is important, you can cut your costs until you are right out of business. You can’t sustain your business on frugality alone.
Obtaining working capital (in the form of debt) may be a useful tool and even allow for a much faster expansion of your business (if used effectively). Still, it isn’t the answer to your business… it is only a tool to get you where you want to go.
(This presumes that you know where you want to go. If you don’t have clarity in your goals, then, as the Cheshire Cat said to Alice (in Alice in Wonderland), “If you don’t know where you are going, any road will take you there.” So, if you don’t have clarity, get that first.)
Assuming you have clarity, there is one specific thing you need to focus on: revenue. Sufficient revenue will “cover a multitude of sins”. If you have sufficient revenue coming in, you can get away with all kinds of poor business practices. Note: I am NOT encouraging poor or sloppy business practices. However, I do want you to focus on the main thing — bringing in revenue.
You see, your business is like a bucket. A bucket with holes. Some of those holes are payroll (including you), others are the costs associated with keeping your doors open (such as supplies, required vendor services, web costs, rent, utilities, various customer acquisition expenses, taxes, etc.). Some of the holes are big and some are smaller. You can NEVER plug all the holes.
You CAN make some of them smaller. You can minimize your expenses. You can squeeze a dollar until it squeals. But you will still have outflow.
The revenue flowing in is the water in your bucket. You have to have water FLOWING into the bucket to keep the bucket full. And the water HAS to flow in AT LEAST as fast as it flows out. (Flowing in faster than it flows out is a good thing.)
Sure, if you have enough poor practices (holes in your bucket), you will run out of money more quickly and have to close your business. Likewise, good and efficient business practices help shrink the size of the holes. But they are always secondary to keeping the revenue flowing in.
You may have problems in any area of your business, but sufficient revenue will allow you to keep going in business and give you the opportunity to correct them at a more leisurely pace.
The main point I want to leave with you is that bringing in (and increasing) revenue takes priority over all aspects of your business. Because if you don’t, you won’t have a business to be in.
Need help with identifying additional ways to increase revenue? Contact me and let’s explore your situation.
Have a different take on it? Use the comments and tell us about it.