Sunday, June 5, 2011

Knowing When to Change Your Business Model

No matter how far you have gone on a wrong road, turn back.” ~Proverb

Being realistic about what is possible and, more importantly, what is impossible, is absolutely critical when running a business. There come times in most entrepreneurs’ lives when they will not be able to accomplish the task they have set their sights on. Recognizing this is not a sign of weakness, but a sign of strength. Being realistic about what is achievable is so important as it keeps you from wasting energy trying to move an immovable wall.

We were helping a very neat couple who was working so hard to make their business successful. After four years of laboring, the business had stalled at $1 million in sales. They were struggling since they had not been taking much money out for themselves in the hopes that the business would gradually improve and they could recoup some of the dollars they had invested. But no matter what they did, their sales remained flat. They came to us for help improving their sales efforts and a number of other areas of the business. They figured if we improved some of these other areas, sales would follow.

Trying to help them was so frustrating for me. These clients did everything I asked and had good results in every area except for sales. They were just working so hard without much to show for it. With clients that are both good people and hard workers, it is very frustrating to watch them give it their all and still fall short of the results we all are hoping for.

Finally, exasperated with the lack of results, we had one of those serious and life-altering conversations about whether the cause was something they were or were not doing or market conditions. We all agreed that the market was fully saturated and there was very little they could do now to improve sales.

Once they understood that it was impossible to gain market share effectively – there was just nowhere to go – we began discussions about other services they could potentially offer to differentiate themselves from their competitors. They determined they could add three or four additional products and services to their mix to revive their business. I really believe that with some time and energy, they will be able to grow their business by concentrating on these additional areas.

Another firm we were assisting was having a tough time staying competitive in the Tallahassee market. The State was spending less and less, which was significantly impacting the firm’s sales. I tried over and over to help this entrepreneur realize that he was swimming upstream and that no amount of hard work would ever change that. I am very concerned about this business as the entrepreneur has yet to recognize that in order to survive, he must change.

Now go out and make sure that you are competing in markets where your business can grow and increase profitability. If your sales – either overall or of a specific product or service – stall for longer than two years, you need to consider how you can expand into other markets. Working harder is not always the answer.

You can do this!

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