In situations where profit is too low and cash flow begins to dry up, the biggest mistake we can make is trying to force our sales “onto steroids” by doing the same things as before, only louder.
The most common mistakes are creating a new website, changing visual identity, increasing activity and posting on social media, hiring additional sales representatives, and similar actions. Or to put it differently — if we have a “tumor” in our business, this strategy will only make it grow.
Along this path, we often go through periods of reduced profit and cash flow as a result of our “intensified” activities. The “dopamine culture” (the hormone of happiness) fostered by technology and smartphone use, which creates a constant and uncontrolled need for “micro-excitement,” plays a major role here — it is far more exciting to “pump up” marketing and sales activities than to take the necessary time to identify the real problems in the business.
However, an experienced business owner has a wide range of tools and levers in their entrepreneurial arsenal to increase profit and cash flow without falling into the trap of disproportionate investment in marketing and sales. In some situations, it is not enough to simply reallocate resources in a new way or improve efficiency; sometimes it is necessary to change the existing business model. When it comes to growth and profitability, we rarely reach for major changes to the business model — yet sometimes that is exactly where the root of the problem lies.
There are five key questions that must be answered when it comes to the business model:
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How many resources (time, effort, money) must we invest?
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Over what period of time?
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How much revenue do we want to generate?
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Is that revenue sufficient to justify the costs of investment and maintenance, with adequate profitability?
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Can we achieve a return on investment within the planned timeframe?
In our efforts to become more successful, most of us tend to see the solution only in increasing revenue, instead of taking enough time to gain clarity on the answers to the questions above.
Signs that we have outgrown our current business model usually become visible when the business starts to “creak” and inefficiencies begin to surface — in other words, when more “drama” than usual appears in the workplace as profitability declines. At that point, we need to change the business model, not the marketing strategy, nor commission a new visual identity or new website.
