If there is one REALLY big mistake I see almost all small businesses making it's this: Fear of spending money avoiding spending money, and, therefore, not spending money on the things that are ABSOLUTELY NECESSARY for the business to not only survive, but grow.
They all just keep doing the same thing and expecting different results I do several seminars a month on "How to Double a Business in a Matter of Weeks.
" And in every seminar I ask a series of questions that are always answered the same way, the wrong way.
Right after I've gotten a roughed out business plan on the whiteboard in the seminar, and where we can see how different key measurements will effect the business, I ask this question.
"What will you do the first month that you don't have enough cash to pay overhead costs?" The answers are consistently the same from seminar to seminar, and they are ALWAYS wrong.
In every case, everyone is looking for where to cut costs.
Don't get me wrong, I don't want to spend money where it isn't doing any good.
However, the decisions all of these small businesses make are STRICTLY on not spending, rather than on making sure that what they do spend is spent in the most effective way.
Let's say that $1 spent on this will generate $10, $1 spent on another area will generate $100, and $1 spent in still another area will generate $1,000.
Where would you spend your money? Sounds easy, right? You'd think so, but I'll tell you from experience in hundreds of seminars that the answers are consistently around not spending anything.
Everyone would have chosen to not spend any one of those dollars, which is a killer to business.
The thoughts typically are something like this, "I've got to stay within my budget, so I can't spend..
...
[whatever]", or "Because I didn't have enough customers last month to pay the bills I'll have to cut down on spending this month.
" And that last one usually cuts down on spending on marketing..
..
the very thing that they need.
Usually, when I get that last question, I'll ask them "for every dollar spent on your marketing this month..
..
how many dollars did it generate?" The reason they can't answer that question is that they look at everything, including their marketing, as an expense rather than an investment that has a Return on Investment.
So, they are "cutting expenses" which means they cut any dollar without knowing what it generates.
And, when you don't know what it generates, there are several catastrophic outcomes from cutting that expense: 1) More often than not, it was a profitable dollar.
They just didn't know it.
And, in fact, most of the time they just hadn't spent enough to overcome overhead costs, they weren't at break even yet.
Therefore, it required spending more to overcome overhead before profits would start.
2) Without knowing WHICH dollar generated the best return, there was no way to manage the outcomes to move the dollar to the best return, or to even find that sometimes by tweaking the system that dollar was spent on that the revenue could be taken up by multiples.
Most of these people were clueless when it comes to what was working for them, so..
..
they just cut expenses, and cut themselves right out of business.
While they are doing that, others that are managing those dollars to find the best place to spend them are increasing revenues by several times, and actually spending less to generate more.
They all just keep doing the same thing and expecting different results I do several seminars a month on "How to Double a Business in a Matter of Weeks.
" And in every seminar I ask a series of questions that are always answered the same way, the wrong way.
Right after I've gotten a roughed out business plan on the whiteboard in the seminar, and where we can see how different key measurements will effect the business, I ask this question.
"What will you do the first month that you don't have enough cash to pay overhead costs?" The answers are consistently the same from seminar to seminar, and they are ALWAYS wrong.
In every case, everyone is looking for where to cut costs.
Don't get me wrong, I don't want to spend money where it isn't doing any good.
However, the decisions all of these small businesses make are STRICTLY on not spending, rather than on making sure that what they do spend is spent in the most effective way.
Let's say that $1 spent on this will generate $10, $1 spent on another area will generate $100, and $1 spent in still another area will generate $1,000.
Where would you spend your money? Sounds easy, right? You'd think so, but I'll tell you from experience in hundreds of seminars that the answers are consistently around not spending anything.
Everyone would have chosen to not spend any one of those dollars, which is a killer to business.
The thoughts typically are something like this, "I've got to stay within my budget, so I can't spend..
...
[whatever]", or "Because I didn't have enough customers last month to pay the bills I'll have to cut down on spending this month.
" And that last one usually cuts down on spending on marketing..
..
the very thing that they need.
Usually, when I get that last question, I'll ask them "for every dollar spent on your marketing this month..
..
how many dollars did it generate?" The reason they can't answer that question is that they look at everything, including their marketing, as an expense rather than an investment that has a Return on Investment.
So, they are "cutting expenses" which means they cut any dollar without knowing what it generates.
And, when you don't know what it generates, there are several catastrophic outcomes from cutting that expense: 1) More often than not, it was a profitable dollar.
They just didn't know it.
And, in fact, most of the time they just hadn't spent enough to overcome overhead costs, they weren't at break even yet.
Therefore, it required spending more to overcome overhead before profits would start.
2) Without knowing WHICH dollar generated the best return, there was no way to manage the outcomes to move the dollar to the best return, or to even find that sometimes by tweaking the system that dollar was spent on that the revenue could be taken up by multiples.
Most of these people were clueless when it comes to what was working for them, so..
..
they just cut expenses, and cut themselves right out of business.
While they are doing that, others that are managing those dollars to find the best place to spend them are increasing revenues by several times, and actually spending less to generate more.
Source...