Small Business Saturday Blog

Is your business leaking money?

Tuesday, April 17, 2018 at 18:20

The Leaky Bucket theory is a handyanalogy and one that I use a lot with my clients.
Think of your finances in this way: Themoney you earn flows into your bucket. The money you spend inevitably leaks outand you are left with either a profit or a loss.
But there can be holes that, no matterhow small, allow money from other areas to trickle out. Most of the time theseleaks are unnecessary and completely avoidable, yet difficult to find orseemingly too insignificant for a busy Business Owner to notice.
My goal as a coach is to use this 'leakybucket' theory to offer an outside, experienced perspective and patch yourleaky bucket as best as we can. If you’re frustrated that your businessseems to be doing well but your profits aren’t matching your expectations, youmight be leaking money.
The obvious way to fill up your'financial bucket' is through increased sales and a drive to increase profits.Patching your leaky bucket isn't just about savings or driving moresales, though. Taking a look at how you manage your expenses and your financescan pinpoint unnecessary spending that is hurting your bottom line. However, itis just as important to take a closer look at any potential losses resultingfrom factors such as utilities, team performance, business procedures topurchasing decisions and even credit-card processing.
I place great importance on reviewingthe P&L on a monthly basis, looking in every nook and cranny for hiddensavings. Many expense leaks are the result of seemingly minor choices that addup to a lot of lost cash. Even if you think you have all your expenses undercontrol, its worthwhile to do a quick check for any cash drips.
Think Before You Discount
It's a tempting idea isn't it? To offera reduced price on your product or service in hopes that it will drive salesand gain you lots of new custom. Yes, this is exactly what discounting does.However, the spike in sales is only short-term, and the customers gainedmore than likely won'tbe returning for repeat custom. Discounting willnot win you long-term success and may do more damage than good. Let'sexplore why discounting may be doing more damage than you think...
As business owners, we are often temptedto discount our product or service, thinking it will win us customers and drivegrowth. Where the real problem lies isn't with generating the newcustomers and sales, it's what that discount in price represents:
1. Lower Perceived Value
Most people value a product/servicebased on its price. Lowering the price effectively demonstrates to yourprospect that what you're offering won't truly add value to their life.Whilst a customer may still might buy from you, they won't place as much valueon your brand as they most likely would have before.
2. Bad Precedent
When you offer a discount, either on thefirst engagement or the seventh customer engagement, there’s no going back. Assoon as you lower your price, your customer will expect the same price nexttime.
3. Lack of Confidence
Cutting your prices tells the customerthat you don’t believe in what you’re selling enough to warrant selling it forthe standard price. As soon as you offer a discount, your prospect immediatelyloses confidence in you and assumes that you don’t have faith in what you’retrying to sell to them.
4. Price Focused
The last thing you want in a salesconversation is to be focused on price, and that’s just what happens when youoffer a discount. When the conversation is focused on price, it leaves no roomto talk about the value, the story or the qualities of your product/service. Inthe long run, it’s hard to sell something based on it’s price than on it’svalue.
Question: Is price your onlycompetitive advantage?
When you offer a discount, you take thefocus away from the value you provide and basing it directly on the price. Tomaintain higher prices and steady business growth, you have to offer value.Discounts hinder your ability to do that as a reduction in price damages yourprice integrity and makes re-focusing on value difficult in the future.
If you would like to learn more about how to stop the leaking, do get in touch here 
About the Author:
Jonathan Keable is a Business Coach and Consultant based in the South West, providing business development, help, advice, coaching, consultation and mentoring services.


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