A small business normally scrambles for every bit of business that it can get. You need to keep cash flow rolling and one of the ways to do that is to keep the pipeline full of work. You have to ask yourself what you're lower and upper limits in business are. This is where MODELING can help you.
If you had your perfect business world - what would it be? You have to think about this. What would your systematic approach to business be? What kind of customers would "fit" your business model? What job would be too small or too large for your company? What would be good business and what would be
bad business? What alliances or associations would you make with other related businesses? How can you focus your business without losing too much business?
In developing a model you must answer these questions as well as others. One of the most important axioms to your model should be that NO ONE CLIENT IS MORE IMPORTANT THAN YOUR BUSINESS MODEL, system or way of operating. If you
have to bastardize your model to a point where it becomes unrecognizable then it is time to either readjust your model or not take on that business.
You need to ask yourself - what is the downside to taking on this client or customer? Will they benefit my company or can they be a liability? For example, in my tax business, I deal with civil matters and not criminal matters because I do not want my name showing up on the same page as an accused criminal. You have to be careful of your associations. If you are in a pit or den of vipers - don't expect not too be bitten and poisoned.
You can make money in many ways and at certain points in your business you can become desperate. Be careful that in an emotional state you grab for "air" and your business tumbles.
I knew of a $2 million dollar company that took on a $4 million dollar job. They went bankrupt because the client they were working for payed slow and wound up controlling their business. They did not set upper limits on the type of business that they took on.
Most everybody wants to win the lottery to take them out of their woes. Watch for the "fast buck" because there are usually hidden implications. Things are not always as they appear.
Simply put you must have a common sense and rational model. Although your business will not follow the model exactly it will be an indicator as to which way you should be going in business.
If you have no safety net and you come into dangerous waters you are doomed to failure. So your model must have alternate plans 2 & 3 as contingency. Don't make your model too complex with too many variables or you will have a sandy base.
Make your model additive and subtractive and be careful of using multipliers as they can skew your results.
You can always change and adjust your model but if you don't have a model to go by you are chartering into the unknown.
A business without a model is like a person without a brain. |