While managing your business perhaps you have good advice from a knowledgeable business professional. Perhaps you manage your business without any advice, or, perhaps you manage your business because you picked up on what you thought were great business tips from any one of a variety of sources. How is that working for you?
The reality is that a Business Tip is just that, a tip, a small part of something bigger. You have a small part and that little bit is what you are trying to run your business on. Doing that is a huge mistake for you and your business. Without a full understanding of what the tip is leading you to and trying to provide you, all you have is a little bit of information that in all likelihood will harm your business or at best not change your business noticeably.
Not all Business Tips are bad, but at the same time, all business tips are but a small part of the solution. Some common “Tips” that will harm your business are:
- Sell more to make more
- Reduce your prices to capture more market
- More Advertising will get you more customers
- Work harder, not smarter
- SEO is your answer to everything
And many many more.
Each of these, in part, can be sound advice. As they stand by themselves they aren’t worth much to you or your business. The reason is simple, there is much more to the story. Here are two examples:
Sell more to make more
The idea is simple, if you make more sales dollars intuitively you are making more money. However, if other key contributors to the “make more” are not addressed, if they re not on your business dashboard, you could very well be selling yourself into bankruptcy. That is exactly what a client of mine was experiencing when he hired me. His Business Coach had told him simply, “You need to sell more.” That is what this business owner did. Yet his available cash, the heart of every business in the universe, was getting smaller and smaller with each sale. For every dollar this business sold in product or services, they were actually losing 2 dollars. They were losing money on each and every sale.
We worked together to determine exactly what was happening in his business. We determined that his Cost of Good Sold (COGS) was excessive. Further, he had many unnecessary business expenses because a tip he had received from a free service was that he needed all the bells and whistles that a well-established business had in order to seem legitimate to the market. All bad advice based on tips the Business Owner accepted without investigating further and understanding the impact of selling more.
Some Businesses can even sell themselves into poor customer service, excess error and waste, and defective products and services because they have gone beyond what the business can efficiently and profitably manage. This is the result of listening to a Tip and taking it as stand-alone advice.
Reduce Your prices to Capture More Market
A common tactic that comes from a tip is to offer discounts or to reduce your prices. On one hand, it seems logical but if you look at it closely it may be a very poor tactic. Reducing prices may generate more sales, but it will also reduce your profits. In that we are all in business to make a profit off of what we do, profit is important. A 10% reduction in price, for example, could reduce your profits by as much as 40% causing you to have to increase sales by an equal amount or more. I don’t think that is the outcome you or any other business owner wants. There are more viable solutions that allow you to offer your goods or services at a good price that attracts customers for many other reasons.
More Advertising will get you more customers
A business was seeing a downturn in sales and as a result, they did what many businesses do, they advertised more. In this case, they spent over $75K on advertising. Their sales barely increased and didn’t cover the cost of that advertising much less improve the business. So we conducted a customer analysis. Literally, who are their customers, where did they come from, why are they buying, and more. In this instance, the advertising was not where his customers sought their information or even where their interests were. While this could have been good for some businesses, it was not good for his. They were told about how many subscribers and viewers the advertising source had, literally hundreds of thousands, but a closer examination of his customer profile showed that this wasn’t where they shopped. Not having a full understanding of the rest of the story when it came to this tip was very costly for this business and almost ruined it.
Understanding how and why things happen in your business is critical to business success. Don’t rely on Tips to manage your business, you need the entire picture in order to be effective with what you do. If you don’t know how to do this find someone who can, who can do that uniquely and specifically for your business and not someone who will use generalities or “commonly accepted practices.”