So here’s one of those great questions to stop ask yourself just before you spend time or money on something:
“If I do this, will we make more profit?
“If I don’t do this, will we make less profit?”
“Should I do this because it fits with my values – even if I lose money as a result?”
By asking yourself these three questions each time you’re about to spend time or money on something in your business, you can greatly increase your profitability and the acceleration of growth. All too often I find people doing things that just aren’t going to make any measurable difference!
What we’re really looking at here is the difference between costs and investments. A cost is something on which you spend time or money with little or no chance of getting anything useful back in return. An investment is when you use your limited resources of time or available cash with the aim of getting back more than you put in. Spending time and money is how many business owners manage to work really hard and make no money. And the difference between a slow or fast growth business depends upon how well they choose their investments. If you invest £1000 in an advert that returns £1,100 of profit it’s probably going to take a very long time to grow the business. So you might want to add a supplemental question “is this the best way I can invest my time and money?” because there are always options if you look. Sometimes you have to invest defensively, hence the second question was about whether you need to invest some time or money to keep what you’ve got.
A prime example is spending on existing customers. Too many businesses take their loyal customers for granted, enjoying regular orders and assuming that if they just keep delivering, they’ll keep getting the business.
But I’d suggest that every now and again you need to look after those customers and, if you truly value them, you’ll want to demonstrate it by doing something for them above and beyond what’s expected. In this situation, you might not see an increase in sales from your investment (though often you will), but if you don’t make the investment… you’ll regret it when they stop buying. It often amazes me when I see businesses spending 100% of their budget on gaining new customers, and 0% on retaining the ones they already have. But that’s a topic for another day.
Finally, the third question I recommend asking is about your values – doing what’s right. When I suggest to business owners that they should write their business values they’re sometimes unsure what to include. One test I ask them to apply is “If voluntarily upholding one of your values cost you money, would you still do it?”. For example, if you state that honesty is one of your values, then if a supplier accidentally over-delivered to you (you order 5 items, they deliver 6, but the delivery note and invoice show 5) – would you tell them? If you wouldn’t – don’t fool yourself into thinking that honesty is one of your core values. A core value is something that matters more than money. So you get the idea, sometimes you might choose to spend your time or money even though it’s not going to give you a financial return. If you’ve asked yourself those three questions and can’t give a firm “yes”, you just recognised one of those opportunities that you should say “no” to – even if you’re under pressure to go ahead, even if you’ve always done this before, even if it seems interesting. To save yourself even more time you can teach these questions – or your version of them – to your team.
Over the years when Rob Pickering (one of our coaches) worked in larger companies and had what seemed like an endless queue of people at his door, offering him inventive ways to waste time and money, he would avoid giving them an answer. Instead, they’d get the three questions and they’d need to think about the answers. After a while, Rob would train staff to ask themselves the questions and only come to him if they firmly believed “yes” was the answer. In which case Rob would aim to go with their decision, and state it clearly that we were going with THEIR decision – encouraging them to take responsibility. If it did turn out well, he’d make a point of saying “well done on that decision” in one way or another. If it didn’t go well… you might think Rob would criticise them. Actually it would mean he’d made a bad decision in allowing them to proceed, so he’d take responsibility but seek to understand and help them understand what went wrong.