The 3 step formula to fix your financial model
Ok, did you watch my interview with Robert Craven last week?
Seriously if there’s one thing you should treat yourself to this week, listen to this replay. (insert this link over “listen to the replay” https://www.crowdcast.io/e/expert-interview-robert)
Robert Craven, in case you don’t know, is a real business heavyweight – author of 10 business books (2 have a foreward by Richard Branson no less) and he’s a legend in the marketing world.
I knew he’d be good value and he definitely didn’t disappoint, with lots of painful moments as he dropped hard-hitting truth bombs all throughout the conversation!
So I thought I’d share just a snippet of his interview and give you a powerful idea to think about for your own business.
What IS financial performance?
Your financial performance is a consequence of how good you are at getting people to buy, and how good you are at delivering what you do.
And when you want to make more money, most people assume the answer is to sell more. But that‘s only the answer IF your financial model already works – ie that you’re making the right amount of profit on what you sell.
If your financial model is broken, then selling more will just give you more wheel spin but no more profit. The classic busy fool.
I see far too many businesses focussed on doubling turnover thinking it will solve their problems, instead of focussing on profitability.
Or assuming that marketing is the answer to all their prayers. Going hell for leather and spending a fortune to grow a business model that doesn’t work.
So how do you fix your financial model so you can grow your profits and wealth?
- PUT YOUR PRICES UP! Almost every business is undercharging, discounting to get a sale, and in doing so attracting the customers who just want cheap. They end up running faster but not making any more money.
So put your prices up and you can afford to lose the “pond life” customers who only buy on price! Don’t underestimate how many people are very happy to pay more, and who want the premium service and the best quality.
- DECREASE YOUR COSTS – go to every supplier and ask them if that is the best deal they can do. We already know that most businesses will discount to get the sale so you’ll make savings for sure, which will go straight to your bottom line.
- FIX YOUR UNDER-PERFORMERS – can you educate or change your under-performing customers? If you can’t sack them! Look at your under-performing suppliers – if they can’t give you what you need, sack them! The same with your under-performing products – if you can’t improve them then get rid, and where you’ve got under-performing staff, train them, educate them, and if they can’t be who you need them to be… yes, you know, sack them!
And then, WHEN you’ve fixed your model, and your business is making a sensible level of gross and net profit, THEN hit the marketing and grow your turnover.
This all might sound brutal, but it absolutely resonates. Of COURSE we need to build our businesses on a model that works!
And even though it may feel like a backward step to circle back on these key areas, it’s going to pay massive dividends (literally!)
So, think about your business model. I bet you know in your gut and off the top of your head EXACTLY what in your model isn’t working. You don’t to make this a massive project, just jot down right now what’s leaping out at you:
- Which customers are under-paying?
- Where do you know you can easily increase prices?
- Intuitively who are your underperforming customers and staff members? What products or services don’t pay their way?
And create a simple action plan to remedy them, one by one.
Just this alone is going to increase your profits and cash.
Don’t be a busy fool, stop and take the time to fix your business model!
And take the time to listen to the whole interview (embed link https://www.crowdcast.io/e/expert-interview-robert) because I absolutely promise you that you’ll learn something that will change your future!
(And you can get the Crowdcast app so you can listen on the go so there’s really no excuse!)
Have a great week