I recently had a heart-wrenching conversation with a small business owner. His carpet cleaning and restoration services company was teetering on the brink of bankruptcy. Even worse, he was in denial!
My friend seemed to “have everything” to run a successful business. (AND to have a great life!) He’s a great guy with a loving wife and family. Even better, he is intelligent, energetic, hard working, and honest. His business is located in a mid-sized area with a solid, growing economy. And yet…
He just hasn’t been able to find (and keep) success. Instead, he has continued to struggle year after year until we had this very difficult discussion about him filing for… bankruptcy! Absolutely wrenching! The most frustrating thing about it? The solution to his dilemma has always resided within him.
Having this conversation made me once again reflect on this question: Why it is that some entrepreneurs with few resources, a small market area and strong competitors and turn it into a goldmine? Yet at the same time, other business owners with seemingly everything going for them never get ahead! WHY?
Over the years I’ve discovered that profitability in a business does not start with the quality of the product or service it sells. It doesn’t start with employees, markets, or competitors. And for sure profitability isn’t determined by the current state of the economy! The root of profitability in small businesses is deeply embedded between the ears of the business owner!
Here is the key: The profitability of any business is based on what the owner believes he or she should be earning in profits.
Let’s start with this key concept: In small businesses (and almost all our SFS members own “small businesses” as in less than $10 million in annual sales) profits and personal income share the same space in the owner’s head. So, when we talk about profits what we’re really talking about is the owner’s personal income.
At the risk of oversimplifying let me say this. We grow our profits at the rate that we learn to accept money in our lives. So there really is no “good” or “bad” personal income level. There is simply the level we’ve chosen to live with. Therefore, if you truly want to increase profits in your business, the place to start is by looking inside yourself and deciding what you feel you “deserve”.
Are you done “reflecting”? Good! Time to get to work? Not yet… listen closely here…
All our favorite subjects in SFS: 1) Raising prices, 2) cutting expenses, 3) increasing sales and 4) building a Critical Mass Business are simply tactics for acquiring the money you FEEL you deserve! NOTE: Check out Steve Toburen’s Five Steps to Grow Into a Critical Mass Business BUT, if you do this stuff without first believing you DESERVE more money, you will subconsciously sabotage your own efforts!
For example, here are some classic “sub-conscious sabotage” maneuvers:
Sabotage #1: Raising prices BUT without controlling spending. Result: Now there’s no net gain in profit so the owner stays within what they subconsciously feel they deserve!
Sabotage #2: Cutting costs (which is usually a good thing!) BUT without increasing or at least maintaining sales. Result: The owner eventually runs out of costs to cut and once again… well, you know the result!
Sabotage #3: Increasing sales beyond the owner’s “internal comfort level” so he or she finds all kinds of creative ways to get rid of their new-found profits. Result: Yep, you guessed it!
In my next SFS post I’ll discuss some of the underlying causes of our beliefs about money.