Small Business: Will Working Harder Increase Your Profits?

There are two common myths about running a small business that are simply not true. One is the myth of working harder and the other is the myth that changing everything is needed in order to increase your profits. Let’s take a closer look at these two myths and bust them one by one.

Are you working longer hours, making more sales calls, and meeting with more customers? How is it working? Do you know for sure which of these activities is paying off in proportion to your time, effort, resources, and capital? Often we are lulled into thinking business is going well because sales or profits are increasing, but “At what cost?” In order to maintain efficiency, sales should increase at least proportionally to your investment.

Expanding into new markets and new lines of business can be quite exciting but an objective analysis is needed to validate whether the investment is paying off as expected. This new effort should be assessed against all other current business opportunities. Working harder is not the answer unless the specific activity directly builds customer value and boosts profits. That’s the litmus test for everything you, your team and your business does. Working harder is not the answer if it doesn’t produce the measurable results you’re looking for!

When a small business is struggling it’s sometimes difficult to separate what’s working from what’s not. Too often as a result, small business owners want to change everything. If some core products are selling above expectations, yet a new product is not, there could be a dozen reasons for the slow uptake. If the new product truly solves your clients’ needs, take a closer look. Talk to the marketplace and determine in what ways your new product solves their needs and how can you deliver it profitably.

Take a look at your business and retain only those activities which contribute directly to customer satisfaction. In most cases, many facets of your business can stay just the way they are. Note what products are currently doing well, and those that are not. If margins are not improving or at least holding steady, alarm bells should be ringing. These signals are an opportunity to better identify your customers’ needs. Maybe they’re not using your product according to the directions or the way you think they are. If you take needed action now you can revitalize your offerings and thus, your business.

At the core, businesses revolve around solid offerings that provide valuable benefits to their customers. Generally product features tend to expand over time, yet not all customers want or need all features. A menu-based approach with adaptable pricing can distinguish users whose needs are fully met from those who need a little more support and are willing to pay for it. These adaptations might come in areas that you had not thought of in the context of convenience, flexibility, timing, risk management, or product staging.

The more you know, the more profitable solutions you can provide. When your core products directly address your clients’ challenges you can build intense customer loyalty and increase their switching costs. Just think of the inconvenience of changing your bank, and then apply that logic to your business. Forget the myths and focus on getting so involved in your client’s business that the thought of changing suppliers is quite unappealing to them.

Remember – Just Say No to the Status Quo TM

Donna Marie Thompson, PhD