Singing the wrong note – louder

If you spend more on marketing but don’t have a compelling product/service or sales process, you are focusing in the wrong place.

You don't make money in the beginning.

There’s a reason that there are buyers for existing businesses – because starting one is so damn hard!

In the beginning you have no brand, no customers, no employees (or the ones you have aren’t very good yet), no systems, no facility, no marketing, no referrals, no repeat business…you got nothin’!

So in those early years, you have to invest all your gross profit (and more) into all of those things.

“An entrepreneur spends the first part of their career being desperately underpaid so that IF they get it right, they can spend the last part of their career being wildly overpaid.” – Larry Janesky

That’s the journey you signed up for!  Get it right!

The optimization of your business

Not making any money?  Breaking even?

Congratulations you are managing your business pretty well.  Look at the bright side – you aren’t out of business!

If you want to make a 12% profit, you are just 12% away from doing that!

Profit is simply a balance between income and expenses.  You just need to optimize your sales income and lower your expenses (direct and fixed) to carve out that profit.

Zoom in and look at all of it.

Knowing WHAT valve to turn

Story – A nuclear power plant was shut down and engineers could not figure out how to fix it.  Exasperated and desperate, they called in an expert consultant.  The consultant looked at the various dials and gauges for 20 minutes, and turned a valve.  The powerplant sprung to life.

He sent his bill – $200,000.  The power company thought it was too much money so they returned the bill asking him to itemize the bill.  The consultant sent this back –

Turning valve – $5. 

Knowing what valve to turn – $199,995

Total – $200,000

The power company paid the bill.

Many business owners struggle to make their business work and to make it profitable.  Let’s face it, most all of us have never done this before. We’re all busy doing stuff all day long.  But do you know WHAT to do?

How do you learn?  Experience (but not doing the same thing over and over).  Reading and studying others who have done it.  Learn from others in your business who are doing it well.  Join a network of some kind in your industry of companies you do NOT compete against – otherwise they will not share the really important ideas.  Hire a consultant who knows what they are doing. 

You’re the leader.  It’s on you to know WHAT to do.

Spend 98% of your time learning, studying, and seeing things right, and 2% of your time deciding WHAT to do.

We do business with people we like.

How you come across depends on how your care comes across.  It’s one thing to act like you care, and it’s another to actually care.

What would your customers and employees say about how much you care?

How can you improve that? 

The world revolves around your customer.

The world you have to understand revolves around your customer.  That’s the world they make decisions in – theirs.

What are their issues, problems, fears and frustrations?  What solution options are available now?  

What is good or bad about them?

How can you be very helpful?

Breakeven = Fixed Costs / Gross Profit Margin

The Breakeven of your business is the amount of business you have to sell, bill and collect each month at which you neither lose money or make money.

You calculate it like this – Breakeven = Fixed Costs / Gross Profit Margin.

Fixed costs are expenses you’d have to pay even if you did no business.

Gross Profit Margin is how much you make on each sale once you subtract the direct costs for providing it – labor, materials, sales commissions, and other costs that you incurred as a result of that sale.

The lower you can get your fixed cost and/or the higher you can get your gross profit margin, the lower your breakeven will be ad the easier it will be to make money.

The farther above breakeven you are, the greater your net margin.  The farther below breakeven you are, the greater your net loss.

The Turnaround Artist

In my School of Entrepreneurship (thesoe.com) we talk about the various functions of your business as offense or defense.

Offense is functions that bring in more business.  They include Marketing, Sales, and in our case our Appointment Center.

Defense is functions like Operations, where you spend the money to provide the product or service and it includes Production (manufacturing), Service and Accounting. 

If your business is making a good gross profit, but not a good net profit, then you need to cut overhead (‘indirect expenses”) (which would be a defensive move), or sell more business to get above the breakeven that your current cost structure is causing (which would be an offensive move).

Breakeven = Fixed Costs / Gross Profit Margin

If your business wanted to improve its financial situation by cutting costs alone, it can only benefit by the amount you cut.  That could be enough to solve your problem.  If not, then you need some offense.

Alternatively, you could take offensive and defensive strategies at the same time and re-engineer the financial structure of your company.   Let’s say you –

!) Cut some overhead (costs you have to pay even if you sold nothing) to reduce your breakeven. 

2) Then you cut some direct costs (costs tied to the production of the product or service that go up when you get busier and down when you get slower) and that improves your gross margin, therefore reducing your breakeven.

3) Then you play a better offense (sales and marketing) and get more business and get farther above your breakeven.  The farther north of your breakeven you get the better the margins!

BONUS – you innovate and bring more value to your customers in a way that does not cost you anything and raise your prices a bit as a result.

BOOM – you’re your own turnaround artist!  And if you can do that, you’ll probably never be in trouble again.

A Leader has Friends

Being a leader, I have a lot of friends.  When I walk into a room people smile at me, say hello, and act like my friend.  My world is probably nicer than most because people at work smile at me more – because I am the boss.  Just telling the truth here. 

Do I like it?  Yeah!  It’s nice!  But the truth is, my positional power gets me instant friends when I meet people.  Some call me “Sir” or “Mr. Janesky”.  (I tell them to call me Larry.)

(Funny how when I go to a place where nobody knows me it’s like being in a different world – something is different. I’m just an average person!)

Most of my best friends work for me.  (A person who was trying to cut me down once said “You pay all your friends”.)  lol.  True!  

I obviously have a healthy relationship with this idea and with my friends.  Of course, how you handle all this makes a difference.  If your ego balloons due to your positional power, or you start talking down to people, then others will see that and the percentage of fake friends you have will grow, and the number of genuine friends will shrink.  

Leaders will get a lot of fake friends who want to kiss up to get something.  Knowing the difference between real friends and fake ones is important.  Real friends will tell you where you can improve – fake ones would never do that.

No matter what, leaders will attract fake friends.  It may be people just showing respect and they are a bit awkward in trying to be friendly.  Put them at ease and smile back and take an interest in them.  

When you identify someone who is a dangerous fake friend, who makes you feel uncomfortable, your gut saying “watch out”, keep them at arms length or remove them from your organization.

“A bad friend can be more dangerous than a determined enemy.” -Dr. Mardy Groethe

Of course, leadership isn’t always sunny faces around you because you are the leader.  Some will hate you just because you are the leader (“the man”), and others will blame you, publicly or privately, for all the imperfections and ills of anything you could possibly control somehow. 

Hey – you wanted to be a leader!  

Learning how to deal with your position and celebrity effectively is important for a leader not to be destroyed by his own rise to the title, however that happened.

As for me, relationships are important. and I respect those that can do their work well, get results, and want to be here.  I hope I have a million friends, and over 40 years in business, have learned to enjoy the people around me with all their idiosyncrasies.

” A homemade friend wears longer than one you buy in the market.” – Austin O’Malley

Trust Your Gut

Your Intuition is screaming at you.  Listen to your gut.

Ego will fight your gut, but your gut is all-knowing.

Most every time I ignored my gut I made a mistake and paid the price for it.

How about you?