Do you want to know which areas of your business MUST be prioritised to help ensure success and longevity? I will share and elaborate on 3 areas that I have come to learn that are imperative for that to become a reality. They are:
Focusing on the value proposition
Establishing multiple revenue streams
Monitoring cash flow
Hello, I’m Georgia and I started off as a wedding and lifestyle photographer before branching out into the field of personal branding, mentoring and business coaching. My desire is that there will be many more entrepreneurs that succeed in business and that all their (your) hard work and sacrifice pays off! I would love to connect with you and find more out about your success stories and the lessons you have learnt along your business journey so feel free to connect with me via social media, and if you enjoy this article then please join the family by signing up to my newsletter and emailing list to receive exclusive content, freebies and offers – to get you started you can have 5 free stock photos to use on your social media.
Right back to business…..
Building and running an efficient business can be difficult work and it can be hard to know what the primary focuses should be to increase the chance of success. The first area that I can not stress enough that is absolutely key is to focus on is your value proposition.
What is a value proposition? Well, it is simply the service or product that you’re offering your potential and existing customers. You are proposing that they use your business (for whatever it may be), and for the customer to say yes and use you once, twice or even on a continuous basis, they want to be getting great value.
Value doesn’t always have to mean that they are getting it cheap. It doesn’t even have to be explicitly a monetary value, although this may come into the equation at some point depending on who your target audience is. If you are targeting an audience on a budget then money will be of prime significance, but if you’re targeting the big spenders who seem to have money burning holes in their pockets, then the price is not necessarily the issue – in fact being too cheap can put some customers off!
Value could be a whole array of things that you are offering. Here is a list of a few suggested things:
Convenience – just think, why do take away services do well? You can cook a curry yourself for a lot less but it is because of the convenience (and joy) of not having to cook.
Quality - People want products that will last and be fit for purpose now and well into the future.
Professionalism - People can often do certain things themselves but they desire a professional job or product. People can take photo’s on their phones but do people really want their wedding day photographed on an iPhone?
Experience - Does your product or service provide a thrill such as a sky diving experience in a wind tunnel.
Ultimately you want to locate and fix a ‘pain’ that the customer has by delivering a solution. What of the simplest way of brainstorming this is by using the Value Proposition Canvas. I have written another blog on it which also has an example in it so you can get a better idea of how to put it into practice. Or if you would rather you can watch my video on it below.
Establish multiple revenue streams
The second area that I truly believe is critical to ensure longevity in business – and possibly even the difference between getting established or not – is to ensure you have multiple revenue streams. My point is really aided by the 2020-2021 pandemic where so many people have lost thousands and face collapse. Some business quickly learnt to adapt and whilst others have scraped by, it has highlighted how important it is not to have all your eggs in one basket!
Take the wedding industry for an example. I know so many photographers that solely focussed on wedding photography and therefore really felt the pandemic hard. Many weddings were postponed or cancelled, whilst others went ahead with limited numbers and decided not to use a photographer for the whole day as originally planned because of the limited number of guests allowed and because people were wearing masks.
Now had they had some other forms of passive income it may have helped cushion some of the blow and relieved them from some stress. For example, they could sell prints on their website, stock photos for social media or mobile phone presets that they have created for people to use on photos that people have taken themselves.
Passive income is just one way we can ensure we have multiple revenue streams. I will be looking more explicitly at some of the different ways in the future so be sure to subscribe to the blog all my other social media platforms so you don’t miss out.
Another aspect you may consider is who your customers are and whether you need to branch out to more. I know of businesses that only do work for 1 other business or provide products for one retailer. More often than not it is because they are inundated with work and orders from that one retailer and the money is really good. But businesses can be sold and the new owners may not want to use you or pay you as much, and what happens if that business collapses? There may be times where people are paying you for exclusivity to a product and therefore you can’t sell it elsewhere but then it would be worth looking at other products or services that you could offer to others just in case.
I am fully aware that there will be many that have been established for years and years by only supplying to one customer, but there will be many more that have struggled to make it and have found themselves majorly out of pocket because the sole business/customer that they worked for went bankrupt or stop using them altogether for one reason or another.
Some good things last, but others are only for a season and when considering the longevity of any business it is important to consider the potential pitfalls and circumstances that could arise, crippling your business and bringing all your time, energy, effort, finances and sacrifices to a standstill. This pandemic has been a firm reminder that we don’t truly know what the future holds or what is around the corner and that it is important to establish multiple revenue streams to help us ride out the rough times and enable us to stand the test of time.
Monitor cash flow
One of the number one reasons businesses fail to get establish or last is because of a lack of cash flow. Cash flow is not revenue or profit and sometimes the problem is that people simply don’t know the difference between these terms and what they mean in practice. In brief, this is what they mean:
Revenue – the total amount of income that your business receives BEFORE any expenses are taken off.
Profit – the difference between your revenue and expenses.
Cash flow – the total amount of cash (or cash equivalent) that the business receives or pays out to cover expenses.
So let's just say you have acquired a new customer who wants an order of 10,000 handmade coffee mugs. You have quoted them £5 per mug so that is £50,000, but they only pay you that money once you have finished the product and ready to deliver them. Now let's say it costs you £2 in materials to make those mugs and it will take you 6 months to make them. That means for materials alone you will have to pay out £20,000 over the course of those 6 months before you get paid, plus any other expense such as your wages, insurances, workshop space and bills such as gas, electricity and water. If that all comes to another £15,000, then you will have been paying out £35,000 before you received your £50,000 income from this job.
What this means is that if you don’t have that money available or slowly coming into the business through instalments from other paying customers, then you will find yourself in the red - in other words, you will be overdrawn. And that may mean high fees which will dig into your profits, or your suppliers may refuse to send you any more materials until you clear your balance pushing the completion date back. You could find yourself without wages for the next few months until you have some money coming in. The worse case would be that you can’t deliver on your agreement and have to either ask the customer for an instalment, which they may not take kindly to, or you may not be able to fulfil their order causing them to go elsewhere and all that you had already invested was for nothing and for no money. Plus this could damage your reputation.
Taking on huge jobs that have high-profit margins may sound great but if you don’t have the cash flow to deliver your service(s) or product(s) then what you thought was the job that would make you can quickly become the job that breaks you. Make sure you focus on cash flow and beware of what you have coming in and going out on a regular basis to ensure that you aren’t biting off more than you can chew, or see if you need to have customers stagger their payments. One alternative for the example could have been that the customer had to pay a percentage upfront to cover some of the costs. At 20% they would have had to have paid £10,000 upfront, and although this wouldn’t cover the full £35,000 needed over those months, it may have been enough if they had £10,000 in the bank and another £2500 coming in every month from other regular customers.
Don’t just get drawn in by the profit margins because you will only be able to enjoy those profits if your business can deliver on its promises.
I hope that those 3 pieces of advice are thought-provoking and useful. Running any business comes with difficulties and sometimes we are powerless to do anything about them. But by ensuring that we are always providing value for our customers, and keeping a close eye on our revenue stream and cash flow, we can help cushion the blow and help us ride the waves of uncertainty when they come. The last thing any of us want is for all of our hard work and dedication to be bought to ruins and I am of the opinion that these 3 areas are key to helping us build strong, healthy and profitable businesses that stand the test of time.
I am always cheering you on.