Want To Make More Money With Your Business? Perform a Business Review
Step Two: Cut The Fat
When it comes to increasing your income, the first thing you need to do is look at where you are currently. That’s why I recommend that each of my clients perform a thorough business review before they start any new big outreach projects. In my last blog post, we started off by looking at our list of clients and customers and thinking about ways to WOW them so they not only keep using us but refer us and use us for new and larger projects.
In this blog post, we’ll look at ways to “cut the fat” from your organization. You may wonder what cutting back has to do with making more money. My outlook is that money saved is money earned. It makes no sense to work hard to earn more money if it all goes right back out the window without results.
Look at your business. Where is your money going? If you don’t already, you should begin keeping very close track of your finances. Learning Quickbooks or Peachtree may be challenging, but these are premier business accounting software that allow you to track all your expenses. If you’re just getting started, you could also just use an Excel spreadsheet or a free service like Mint.com. Whatever you use, take a look at where your money is going in both your business and personal life (since they are both related).
Is all of your money working for you? For instance, are you paying for a monthly magazine subscription that you never read, or do you go to an expensive tradeshow where you only get a handful of lukewarm leads? Calculate how much you spent on the tradeshow versus how many leads you received. How much money are you spending per lead? Is the cost per lead worth it (especially if you add in the time spent at the tradeshow).
Another area to take a close look at is marketing. Are you able to see if your marketing efforts are bringing you strong leads? If not, consider cutting your budget or moving it around.
This goes for costs spent on subscriptions, vendors, networking groups, employees and even products and services. If you have a product or service that is not selling very well, ask yourself how much time and money you’re spending promoting it. Do you just need to give it more time to catch on, or is better to take it out of your catalogue and focus on the products or services that are selling robustly?
Don’t forget to also consider how you’re spending your time and efforts. You know what they say, “time is money”. For one week, chart your time and BE HONEST! List every minute you spend trolling Facebook, checking email, on the phone with clients, and working on invoicing and billing. See where your time is going. This can be an especially potent exercise if you feel overwhelmed with work and can’t seem to get to-do items off your list.
You’ll probably be surprised by how much time you spend doing things that are not earning you money. If you find that your focus tends to wander off online, it might be a good idea to shut down your Internet while you’re “working” and then give yourself strategic breaks to let off steam. Another thing a lot of people notice is that a handful of customers or clients are taking up the majority of their “client-centric” time. Oftentimes these aren’t even the highest-paying clients.
Firing a client can be very difficult – that’s money lost – but one way to help you make your decision is to calculate how much time you spend with your difficult clients and divide that by how much you make from them. This will give you an effective hourly rate. Many times this is a shocker. Sure, you may lose money by firing a client, but if you could service two good clients in the time it took to take care of one demanding client, you’ll actually be making more money.
Never forget that the more money you save, the more money you make. That goes for your time and effort too. Always be aware of where you’re spending your resources and be a merciless cutter when you find the fat. You may be amazed at how much richer (and less overwhelmed) you feel without earning a single dime more.
Feeling a little lost, overwhelmed, or ready to take your business to the next level? Consider setting up a FREE 45-minute Discovery Coaching Session to get moving forward.