Edition 71 – Busyness vs Business

Are you in Busyness or are you in Business? There is a difference.

Over the years, I have seen plenty of family businesses that are running around, quoting the work, bringing it in the door, madly scrambling to get it done, then repeating the process all over again with the next job.

Not once do those same businesses stop to think whether they are making a profit on the work they are doing.

So here is how I define Busyness and Business.

1. Chasing Sales is creating Busyness.
2. Chasing Profit is creating Business – business which is valuable, sustainable and enjoyable.

Now, I am not saying here stop chasing sales. What I am saying is start chasing profitable sales. And the only way you can do that is to not just look at the total profit number. You need to break it down to the individual components to see:

1. Which jobs make you money.
2. Which clients make you money.
3. Which staff make you money.
4. Where you can initiate corrective procedures if you are not making money – including not doing some work.

Most family businesses in 2017 have the information at their fingertips to be able to tell them what work is profitable and what work isn’t. It’s just that either:

1. They don’t know how to extract and analyse it – a lack of knowledge.
2. They don’t want to extract and analyse it – a lack of interest.
3. They don’t have the time to extract and analyse it – a lack of priority.

Late last year, I was working with a long standing great client and we were analysing the quarterly profit results. The turnover was great but the profit was lousy. A lot of hard work had taken place and there wasn’t a lot to celebrate for the hard work.

So, right there in the meeting, we started to drill down on some of the numbers. Some they had in their system. Some they had in their heads, which is very common in family business.

We quickly identified a part of the business that was very unprofitable, yet immensely time consuming. It also carried with it a high degree of risk.

In less than three hours, we crunched some numbers, checked the results against our assumptions and quickly identified that whilst the type of work could be profitable, there were certain clients that it was unprofitable for.

So, right there and then, we were able to make a strategic decision in the business about which clients they should be working with and what type of work they should be doing. We changed from focussing on Busyness to focussing on Business.

This Week’s Tip

Imagine what impact less than half a day’s investment in time on knowing more about your business could have on the profitability of it.