The Australian Small Business Blog

Tuesday, May 17, 2011

Addicted to Profitless Turnover

If you are a business owner, you are probably as busy as a one armed paperhanger. You probably are juggling many balls. You may have lots of business, but you feel at the end of the day, you have little to show for it. You may not even be paying yourself a proper wage, let alone have a decent profit to show.

While you may be busy, is every sale profitable? When you take apart your Profit & Loss statement, how much profit is there really?

Quite often, what I see is that most of the profit comes from one part of the business, but most of the turnover is profitless.

Why do businesses do this? Often it is just to keep the staff busy until they find the next truly profitable sale. They become addicted to this Profitless Turnover, and are frightened of saying no to it. As this becomes a major part of their business, much of their time is spent on servicing these profitless clients.

A very typical example of this was a client that installed electrical equipment into premium houses. The truly profitable side of the business was when they dealt directly with the home owner, but most their sales were coming from working with one builder, who was continually squeezing them on price. The builder worked directly with the home owner. Guess who was making the profit! The breakthrough for the client was when they dropped this profitless work provided by the builder, and spent the extra time that created attracting the home owners directly.

Are you still addicted to Profitless Turnover? Break the habit and turn your business into a Profit Machine that Runs Without You!

May Your Business Be - As You Plan It.

Over to You. What do You Think? Post Your Comments Below.

Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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1 comment :

Tash said...

While I agree entirely with you, Greg, that we often need to let go of unprofitable actions, I wanted to add one point.

I occassionally do work for some clients that is less financially rewarding but offers me something else - usually personal satisfaction or maybe a future opportunity. Just looking at the figures means I would never take on such projects and I would miss out on a lot as a person. So review for profitibility (and getting out of ruts) by all means, but sometimes look at the broader picture too.


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