The steely blade of the hunting knife at my throat, made me swiftly take stock of the seriousness of the situation and my immediate options. At the age of 26, I was selling goods that included hunting knives from an outdoor stall when one of the patrons grabbed a knife and held it to my neck demanding money. I quickly made a decision that might have saved my life.
Today in business, many owners are in a similar but perhaps not as deadly situation. They are however, facing threats that could have serious consequences now and into the future. The shortage of labor, rising costs, inflation and supply chain challenges are forcing owners and managers across the nation to make serious decisions to keep their businesses profitable. In many cases employees are not aware of the gravity that their employers are facing in keeping their businesses afloat in these disruptive times.
The need for profits in business are many that include:
Keeping jobs and making Payroll for employees
Investment in inventory and assets
Contributions to the community and non-profits
Enable Owner to retire as they don’t have some of the benefits of employees
Profits fund future growth and diversity
Paying taxes that pay for government spending
Here are 5 Things You can do Now to Get and Keep your Business Profitable:
1. Review Your Business Model: Recently I had the opportunity to work with a business owner who was working in preparation to sell the business in two years. While the overall operation was marginally profitable, there were divisions within the company that were not. If you have areas of your business that are eroding your bottom line, there is no better time than right now to review your business model for those areas and either fix them or fold them.
2. Analyze your Costs: When times are good, many businesses pad their expenses with luxury items that are perks to the owners, clients and employees. When profitability is impacted, unfortunately we don’t take the time to go through our expenses line by line and determine their need and value to the business. The elimination of a couple thousand dollars in expenses a month can add tens of thousands of dollars to the bottom line at the end of the year.
3. Adjust your Prices: When times were good, many companies adjusted their prices once every year or two. Now clients are telling me that due to unprecedented inflation and price changes from suppliers, they are having to review their prices monthly. While this is a costly endeavor, the consequences of not adjusting prices is serious. Eroding margins are causing many companies to move from being profitable and in the black to losing money each and every month.
"My Customers will leave if I raise my prices”, is a common misconception that many businesses hold. Last year, one of our clients made the decision to raise their prices by 15% across the board. They were scared that their customers were going to complain and leave them. Of the hundreds of customers that they served in the following weeks, only one customer even mentioned the higher prices. The reality is that most customers don’t notice price increases of less than 15% and right now most people are expecting higher prices because if you haven’t raised your prices, you are one of the few remaining companies left to do so.
4. Fire Some Customers: Recently we were working with two different businesses that looked at their customers list with the aim of determining whom their best customers were and the viability of serving their customers. Both found out rather quickly that they had a couple of their key customers were actually costing them money. In one case the business owner made the decision to fire the customer due to the demand and nature of the relationship. In the other case, the business made the decision to go back to the customer and negotiate better pricing in order to keep the business open. There is no best option except for the one that enables you to continue to survive in the best possible manner.
5. Stop and Think Strategically: When our businesses are under threat, the stress can be enormous. Often the only thing we can focus on is coming up with a short-term solution that will make the pain go away. Unfortunately putting a small band aid on a large wound doesn’t facilitate healing. Complex problems require strategic thinking and often surgical procedures that take planning. Setting time aside to stop and think strategically, will make a world of difference to your immediate and long-term stress and bottom line. Don’t do this alone, engage your team and your key staff. They want you to thrive for their sake as well as yours.
Panic doesn’t usually work when we are faced with serious critical situations. However, a calm demeanour and problem-solving mindset can enable you to survive when facing immediate adversity. Businesses need profits to survive as it’s the lifeblood of operations. If your bottom line is threatened at the moment take the time you need to get your team engaged and come up with solutions that will enable you to be profitable and serve your customers, your employees and your communities for years to come.
Dave Fuller, MBA, is an Award Winning Certified Professional Business Coach and the author of the book “Profit Yourself Healthy”. Feel the knife at your throat? Email dave@pivotleader.com