You can’t sell your way out of a hole. You need to attack the issue.
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“If you sell more, you make more” is one of those basic, business concepts that we take for granted. We assume that it’s always correct. And, when your business is profitable and healthy, it generally isss correct because each sale is profitable and you have the funds to cover any new expenses caused by increased sales. You also don’t have to worry about any looming problems. You can just focus on selling more, delivering high-quality work, and running your business.
But, “if you sell more, you make more,” isn’t true when a business is in trouble. After all, businesses are usually in trouble for a reason. Their services might not be profitable (or not profitable enough), they could be carrying a lot of debt at high-interest rates, they may be stretched too thin, etc etc. Selling more often exacerbates these issues.
When a business is in trouble, you need to focus on the true problem (and that problem usually isn’t sales volume). Until you fix the true problems, selling more will compound a business’s problems and make them worse. Selling more of an unprofitable service will dig you deeper into a hole, selling more while you’re deep in debt (without focusing on paying it down) leads to taking more debt to survive, selling more while stretched too thin leads to being stretched even thinner, etc. When a business is in trouble, you need to make fundamental changes to the way it’s run before trying to sell more.
How to tackle the three example problems mentioned above:
Unprofitable: Profit is based on two numbers, your revenue and expenses. An unhealthy business should try attacking both of them. First, raise prices 10-20%. You’ll have an easier time raising prices with new clients, but you should still try to raise your old clients’ fees. Then, cut costs. I don’t mean ‘corporate takeover layoff your entire staff.’ I mean strategically look at your expenses. You may be paying for unused software subscriptions or you can shop your services around to find a cheaper provider. Also, as the owner, cut back your own personal expenses so you can reduce your salary to save your business (plus, you might be living too large for your business to support).
High-interest debt: High-interest debt is an endless cycle. It’ll keep accruing interest and draining your business until you’re forced to focus on it or close. First, try refinancing your debt with a traditional loan. Depending on your situation, you might not be able to, but trying to refinance is a good first step. (Note on credit card balance transfers: balance transfers come with transfer fees and technicalities. If you’re going to transfer, read the rules.) Then, you need to pay it down. If you have multiple debts to tackle, continue making your minimum payments, but try to make larger payments to the highest interest rate debt.
Stretched too thin: When you’re stretched too thin, things start to fall between the cracks. Forgotten emails, unfinished client work, unsent invoices. It all adds up to you being incredibly stressed and unhappy clients. When you’re stretched too thin, you need to dial it back which can mean a few things: a) stop taking every client project that comes your way and focus on what you’re good at, b) empower your employees and delegate some of your responsibilities, or c) automate some of the tasks that are wasting your time. Regardless, you need to take some of the work off your plate.
Takeaway: Recognize when your (or your friend’s) business is in trouble. Then, focus on the real problem that’s causing the trouble instead of trying to sell more.
Have a great weekend and stay safe!
Michael Eckstein