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If It Doesn't Add Up

Business is all about making a profit

At ACTION, we define a successful business as "a commercial, profitable enterprise that works without you." Now, isn't that interesting?

A college professor once defined business insanity as "continuing to do the same thing over and over again and expecting the outcome to be different."

So, if your business strategies are not adding up to business profits, quit doing them, or do them differently.

What is a business?

To be a business (that is, "a commercial, profitable enterprise that works without you"), your business must receive a substantial return on investment plus a full wage for every hour you spend working in your business. When this happens, you will be able to pay someone to do your job and the business profits will not be affected.

The question "Does it add up?" must be asked for all areas of your business.

Advertising

Advertising is a prime example. If you run an ad it and does not get an immediate response, there is no point in keeping that ad running. It is wasting precious time and money. Change the ad or where it is running.

Hiring

Increasing your team must also add up in dollars. Perhaps a business should consider setting training and business systems in place so more junior employees can be hired to follow the systems, rather than hiring senior employees who have the head knowledge of how it should be done. Alternately, perhaps the business might explore upgrading the machinery or technology instead of adding team members.

Buying a business

If you want to buy a business the figures also must add up - or have the potential to do so. Make a list of the criteria the business must fill and make sure this list is filled before you commit yourself. Many people buy into something believing it would fulfil their needs, only to discover the figures were inaccurate or did not add up. If you are not sure, get help. Two heads are better than one, and an ounce of prevention is better than a pound of cure.

A great idea when looking at a business is to check the industry average and see how your business compares with the average. Given that four out of five businesses go broke in the first five years, you may want to be better than average.

It is all about making a profit

Finally, the bottom line where your figures must add up is in net profit margin. To get this figure a business must add all expenses, including an appropriate wage for all the hours put in the business, plus interest on the capital you put into the business. This will give your real margins.

"If it doesn't add up, why do it?" must be applied regularly to all aspects of your business. Don't wait until the end of the financial year to find if you have made a profit. Business is work, but it should also be fun.

Enjoy your business and get more fun out of life.