Where Does the Money Come From in Your Business?
You’ll remember in the past I’ve talked a lot about where the money comes from, except previously I’ve focused more on who the money comes from in terms of your clients.
And I’ve advised you to rate them, A’s, B’s, C’s, etc, as to who amongst your clientelle is supporting you in style and who is an anchor around your neck. And that you should figure out how to get much much more of the former and much much less of the latter. All this leads to better marketing, improved efficiency, and better bang for your buck. Ultimately, better bottom line profits.
What I haven’t talked so much about is finding out where the actual money comes from in your business. What products and services are responsible for the majority of your profits and what effort do you expend in nurturing those products and services?
Years and years ago when I was in the food game I remember figuring out the exact cost of every single item I sold. It was an enormous task to weigh, measure and calculate the exact cost of a slice of virginia ham, a handful of grated cheese, and a bowl of nachos etc. But it was a TREMENDOUSLY rewarding process, because…
1. I was able to establish my exact margins on each individual product, and in my case, ultimately increase the price where I previously had been losing money or at bare minimum making an unacceptable profit. And I had a few shocks coming my way. Overnight, half a dozen or so products went up 300%, others somewhere in between. Where I was making a great profit of course nothing changed. Interestingly though, NOT ONE COMPLAINT.
2. Armed with this IMPORTANT information, I was then able to focus my attention in terms of marketing products that sold the best and had the greatest profit margins. And in fact, set about even improving the buying price. Imagine the exponential profit I had uncovered, hidden in my sales by undertaking this not necessarily pleasant process.
We laugh at, but should fear, the ignorance of the vast majority of people who do not know where the money comes from. For example, if you asked someone on a pension where their money comes from, the most obvious answer would be “from the government”. The next might be “from all the taxes I paid”. An employee would consider their paycheque “comes from the employer”, when in fact it actually comes from the customers who buy the products and services you offer.
Most people have NO IDEA where the money actually comes from. And that is shocking. What is more shocking is how many business owners do not know where the money comes from. There’s no required course in high school or at university as part of any qualification prerequisite that spells out where the money comes from. Like most parents, the instititions don’t teach it because they don’t know themselves. So go figure where the money comes from in your business and concentrate your efforts there. The effect on your bottom line, profits are bound to surprise you.
Best regards
Mal
