How Can My Business Do Well When Things Are So Bad?

This question was posed by a long-time client at the start of our coaching session. Given current trends, his annual revenue was projected to be down by 25%. And for a business with around $1,000,000 in annual revenue and a 50% gross margin, the potential hit to the bottom line was significant. But even facing such a serious decline in revenue, this business owner ended up improving profitability compared to the prior year. 

Here’s how.

My client and I did a mid-year review of budget vs. actual. It became apparent that revenue was trending downward. That day, we revised the budget through the year-end and determined the magnitude of the projected shortfall … if no action was taken. In order to head off serious cash-flow problems, a course correction was clearly in order. 

After going through the budget line by line to identify obvious cost reductions, there was still a big gap. The next step was to evaluate the pros and cons of a price increase. My client decided to make small adjustments to high-volume items. The impact on the customer was small, but the impact on my client’s bottom line was significant. 

Then my client informed his key managers of the challenge the business was facing. He asked each one to review their respective areas for possible cost reductions. One night shortly after that discussion, one manager called the owner at home at 10 pm. She had come up with a strategy to re-organize staffing that would significantly reduce payroll costs over the coming year. Another manager reorganized how cleaning was being handled resulting in a significant cost reduction. The rest of the projected shortfall was expected to be made up by proactively managing expenses across the board.

After over 35 years of business consulting and financial mentoring, I can say this client’s response is a rarity, not the norm. The “B” word (budgeting) is avoided like the plague. Many business owners see budgeting as a punitive process to avoid at all costs. To make matters worse, if the business isn’t doing well it’s even harder for the business owner to take an honest look at their financials. 

Many of us have a lot of emotional baggage attached to money so it takes courage to come to grips with financial reality. But, when you do the rewards are significant!

Can you imagine how much better this client sleeps at night? How much better he felt about himself? How his employees felt to be able to contribute to the solution? 

If anxiety about your finances is keeping you up at night – you don't have to go it alone. Imagine the relief of knowing you have a solid game plan in place to get your business on the inside track to passion, purpose and profit!