The American baseball player and manager, Yogi Berra, supposedly said: “If you don't know where you're going, you might not get there.” I was reflecting on a client’s journey from the depths of despair, and the ultimate outcome of such despair, to being a national authority in his field, heading a profitable business, with another giant step upwards in front of him.
That journey has inevitably followed a rocky path, hindered by various pitfalls, obstacles, false tracks that lead to nowhere. But as he got back on track each time, and traversed the path, the road ahead became clearer, firmer, and broader.
Let me tell you a little about the client, and the business. Obviously, I can’t tell you the business name, or even the industry. I can tell you he is a professional, with a staff of about ten permanent or part-timers. Let’s call him Tom.
An intriguing part of the story is that in terms of his market, he operates in a niche within a niche – very focused. That is a key part of the story. It makes my client, and his business very different. He is certainly not a “match in a matchbox”. Despite such a narrow market base, it has enabled him to deepen his market and broaden his offerings.
But that is not where Tom started. He commenced in his business covering the entire local market. Some years later Tom narrowed his focus to just one niche, but covering all aspects of that niche.
He then narrowed it to the ‘niche within a niche’; a brave move. Now we all want to grow our business (Do you want or need to grow your business), but it’s how we do so that matters.
So many businesses I know try to market to everyone, so afraid are they of losing a sale. And their marketing message is to everyone, and as you will know, a message for everyone, is a message for no-one (Does your marketing tail stretch to the sea?)
But Tom’s move to have a specific, narrow focus worked, at first. The business grew rapidly, in part because he expanded his offering to this narrow market, training his fellow professionals, and selling them products to help them in their business.
This is known as the Three Prong Strategy, although Tom didn’t know about that.
Prong one is one-on-one servicing your client, but you are limited by the hours you can spend, and how much you can charge for them.
Prong two is one-on-many, and training is a good example of that.
Prong three is leverage, where products provide passive income.
Business doubled every year, for a number of years, but this came at a cost – burnout. He was doing all the work himself, principally Prong One, working 100 hours a week. That is the danger in being reliant on Prong One. You can only grow revenue by working more hours, or increasing prices.
But this lead to some of the false tracks which took Tom off his path. First, to solve the workload problem, he bought in more professional staff. It didn’t work out.
Then a partner was bought into the business, to spread not just the workload, but also the responsibility. When that partner left, Tom was close to bankruptcy.
1. To focus even more specifically on the ‘niche within the niche’, limiting services to only one or to services in the base niche.
2. To seek outside advice and mentoring
When you completely specialise, you become the “go-to” person in that market, the brain surgeon, not the GP. However, if you stick to Prong One, as a professional you are limited by your geography; the time and price dilemma.
So greater emphasis was placed on Prongs Two and Three. The market comes to you, rather than you going to the market. Professionals seeking Tom’s training have come mainly from Australia and New Zealand but have also included the US, UK and Saudi Arabia, Thailand, Canada, and South Africa.
The second key decision relates to that common problem of being a professional, and not running a professional business. As I discussed in “Will you be Road-Kill on the Business Road?” “one large hurdle that must be cleared in a business is the trap of treating the business as a job, what you do, and not a business.
That is why it is so important to go into your business with a plan – plan your entry into the business, and, just as importantly plan how you will operate. You need to be aware of each part of your business, and how it will operate in the plan.”
Business Consultant Ben Fewtrell put it well - “The people that are self-employed earn money. The people that own a business make money.” So many businesses fail because they never learn the basics of how to build and run a business.
And that was the step Tom took, to learn how to run his business, as a business. We developed:
A clear view of the road ahead (Can you see the road ahead?)
Paved the road to success with good information; the information needed to manage the business, disperse the fog of uncertainty, and give a clear view of his world.
Implemented a consistent marketing calendar across all three prongs
Business management and staff management skills
There are now four, clearly defined lines of business, with the sales, costs and profits known for each. Profits have become consistent, and increasing, instead of fluctuating from profits to loss. Cash flow is watched, but no longer a problem.
The next step is planned, and will take Tom, and his business to the stratosphere.
You have to know where you are taking your business. If you are just treating it as a job, then it is unlikely you are taking it anywhere;
Good, regular management information is imperative for good decision making. Where are your profits coming from?
Narrowing your market (niche) allows you to deepen your market and broaden your offering. You will have greater depth and reach.
Develop a marketing calendar. Consistent, regular marketing is required.
Build a team. You can’t do it all yourself.
There are no silver bullets, building good businesses takes time. It’s continuous, incremental improvement that makes the difference.
Tom’s business knows where it is going, and it will get there.
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. They so often lack a management mindset, and lack control over their business. Eight times out of ten that lack of control comes down to a lack of knowledge of what is happening in the business.
For more than 28 years I’ve been helping small business owners plug the profit leaks in their business and restoring their cash flows by assisting them understand the information they need to have control over their business, how to manage and analyse it, and how to answer that critical question – WHY IS IT SO?
If you would like to discuss with me how you might do that, book a Strategy Consult here.
© Copyright 2016 Adam Gordon, The Profits Leak Detective
Some profit losses are pretty obvious - so you fix them.
BUT, what if you don't know profits are leaking, cash out the door?
Possible leaks could be anywhere.
Are there some clues or symptoms that are tell-tales?