What you don't know, won't hurt you!

But it will if you are in business

“If I was having second doubts about needing you – which I wasn’t – they would have been dispelled when I opened that document and was confronted with how much I DON’T KNOW about our own business!”  That was the response I received recently from a new client.

When clients approach me for coaching, clients with businesses that are underperforming despite the crippling hours and effort the owner is putting into them, it is not just marketing that is holding them back.  It is the lack of control they have over their business, and eight times out of ten that lack of control comes down to a lack of knowledge of what is happening in the business.

Profit leaks occur because people don’t know what is happening in their business.  Useful, if not vital, information is hidden in those dark recesses, information which can guide decision making.

Ill-informed decisions are poor decisions, and poor decisions just lead to more problems.

All they know is that they don’t have enough cash and, despite being stressed, react by working harder, usually to try and win more sales.  But if they are leaking cash and profits, working harder will not solve the problem.  They will end up with even more stress, and spend even more time at work, away from family and friends.

There is not much point in working hard to generate extra sales if you have a profit leak!

Think about this: all action is determined by decisions and the quality of decision making is a direct function of the knowledge you apply to it.  Without the right knowledge it is pretty hard to take appropriate and timely action.

Good management requires informed decision making.  And that requires good information, analysing it, and using it.  Making decisions on gut feeling and instincts is all very well, but you are far less likely to make the right decisions.  Facts are better than opinions.  Facts require a good information system providing accurate and timely information. 

So what is the Number One Problem that prevents you generating the cash you deserve?  Like my client above I have found when businesses are struggling, they don’t know what to look for, where to look, or perhaps even when to look.

What they DO know is that they don’t have any cash and are working way too hard.

Generating more sales won’t help your cash shortage if those sales are leaking profits.

Understanding not just where your sales come from, but more importantly, your profits, is critical.

Once you know that, you can make better decisions about where to concentrate your efforts in this cash-recovery situation.

And you can then look at improving your profitability through better margins rather than pushing to sell more.  This means:

•    Increasing margins through better pricing strategies

•    Improving margins through more accurate Cost of Sales – knowing where your costs are incurred, and who incurs them

That is not to decry selling more.  Informed decision making also applies to marketing.  So many struggling businesses don’t know who is their ideal customer.  Rather, I’m told, it is “everyone”.  How do you craft a persuasive message that will move “everyone”?  

If you don’t know your ideal customer is, you can’t develop the right message, or know the right way to deliver that message. 

You need to know their specific problem or need, and at the same time, you need to know what makes it difficult for them to buy.  Unless you know their possible objections, how can you counter them?

And without that information, how do you develop a powerful value proposition, one that will resonate with the customer?

Another example - Just take cash flow, that essential element that keeps your business alive and ticking.  Managing your cash flow means knowing, and controlling exactly how much money is going in, and out, of your business.  It means knowing what you owe, to whom and when. And what is likely to come in, from whom, and when.  It guides your decision making.

Ignorance in business is not bliss.  It will hurt you.

Is your business travelling as well as it could, and should?

If you have some of those dark recesses in your business, if you are floundering in a lack of light and seek illumination, the end of the year is approaching rather rapidly. And I have only two spaces left for a business assessment this month

If you would like to avail yourself of one, and there is no cost – this is my gift to you, book a Strategy Consult here.

© Copyright 2015 Adam Gordon, The Profits Leak Detective 

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