Follow the Money!
A common trap for businesses is getting caught up in activities which don’t produce any income. However, I believe that the way to address this is to ask yourself three simple questions about any activity in your business. I like to call this “Follow the Money!”
Question 1. Is it generating an income?
Most of you already know what’s producing the income in your business but make sure you confirm this by tracking it. Every dollar which comes into your business comes from somewhere. Find out if it was your advertising, your referral partners, your website, word of mouth, etc.
Once you’ve confirmed the source of your business, keep doing it and find new ways to leverage off what’s working. For example, if referral relationships are working – develop more, make it easier for people to refer to you and reward people who do.
New ideas can also help bring more income into your business, however, you can spend a lot of time exploring and implementing them – especially if you add too many at once. Commit to one or two new ideas only and set a deadline for assessment (usually a benchmark of between 3-6 months is good practice).
If something doesn’t start producing income after the time frame elapses, either change it so it does or get rid of it and start on the next idea. Unfortunately, even when an item isn’t producing, we sometimes hold onto it due to past financial or emotional investments. Use your source of business reporting to stay objective, when confirming the real value of an item and don’t spend any more time or money on something which isn’t working.
Question 2. Will it prevent future financial losses or reduce costs?
Items like compliance and risk management are an important part of protecting your business. Whilst they don’t produce a direct income which can be tracked, they perform a valuable function in preventing financial losses in your business.
Additionally, developing new processes or finding new suppliers can help reduce costs in your business and retain more of that valuable income. Always confirm the value of these savings as part of your financial reporting to ensure it’s not just a shiny new idea!
Question 3. Will it insure future income?
Be careful of answering this last question. Maintaining client, referral and supplier relationships are important ways to insure continued business, however, sometimes we may implement or continue an activity (believing it to be of value) even though this may not be the case. Always confirm periodically if an activity is still valuable to your clients and business partners or ask a trusted advisor to give you some honest feedback.
There is no doubt that it’s a challenge to remain focused in business, especially when so many things can consume your time. However, if you ask yourself these three simple questions and ruthlessly reassess anything which answers no to all three, you’ll stay focused on following the money.