Businesses usually have at least 2-3 different products or services that they sell and these usually have different profit margins. The resulting blend of sales margin is what gives you your operating profit BEFORE you take out expenses. With margins getting tight, it may be time to re-engineer your desired mix of revenue. Some questions to ask:

• What are the components of my revenue mix?
• Which of these has the most profit potential?
• Which of these sources of revenue is the most price sensitive?  
• Can I find another supplier for this product?
• Can I figure out another way to deliver the product more profitably?
• Can I bundle this price sensitive product with another product or service?
• What can I do to improve turnover rate for the inventory?
• Should I do anything to improve the marketing of my products / services?
• How do I currently get customer feedback – those that don’t buy from me, why not?
• Consider a different commission / bonus structure that rewards the employees when the business is successful not just when on individual is successful

 A sustainable business model is critical to positioning your enterprise to produce a consistent revenue stream providing for your lifestyle and the families of your employees. Everyday outside forces are at work deteriorating your model…don’t forget to work on it your family is counting on you!     

Entreprenuers are often the primary investor in their company but they seldom act like investors.  Real investors have “choices” where they want to employ their capital.   They usually have some predefined parameters for the amount of risk they are willing to take along with clear financial objectives for their return on equity.       

If you are like many small business owners, somewhere along the path to building the business you ran into some cash-flow potholes.  Survival became the primary focus and investing became secondary.  As the owner of the business you are challenged daily to wear more than one hat.  You are the General Manager; the Sales Manager; the HR department and Credit/ Collections.  Most owners have LOST their investor hat!

Investors have real financial expectations.  Investors have choices.  This is where your business and the publicly traded businesses are the same…you both have investors.  They primarily have institutional investors along with individuals and your business primarily has  private investors.  The private investors usually include you, some other family members and possibly a few key employees.  The difference in your business and theirs comes from the sophistication of your respective investors.

Role of the investor – not concerned (usually not tolerant) with operational excuses for why the business isn’t performing.  If the publicly held rental company doesn’t perform, then the investors’ take their equity somewhere else.  It’s that simple.  The fear of loss of investors’  equity is a key driver in the behavior of a business like this.  This pressure can create a healthy “urgency” within the organization.     

Operational impact of having an active investor - At first glance, the publicly traded rental stores and the privately owned rental stores appear to be very similar, they cater to the same customers and the inventory looks the same.  Operationally though, the leaders within the rental industry operate with a different passion for revenue than most privately owned rental operations.  Being publicly traded or highly leveraged can impose some healthy pressure on a business operationally speaking.   

Generally speaking “profitability” is  spoken, not “cash-flow” (two entirely different things).   Large companies are generally not concerned with cash flow and are focused on profitabilty issues.  Small, privatly held companies often struggle with cash flow issues and lose focus on profitability and improving margins.  In larger companies, operational costs are known within departments and operational metrics are monitored (weekly / monthly) and discussed within the leadership teams.  The strategy is to engage employees guiding them to achieve the desired financial results.   

Privately held companies often do not operate this way or communicate financial goals with their employees.  Maybe the reason your business is not operating more efficiently and profitably is you the investor are letting them get away with it! 

By being so close to the business on a daily basis, you tend to lose your investment vision.  Maybe its time to start acting like an investor rather than a manager?  Be more demanding.  Clearly state your financial objectives.  Hold people accountable for results.  reward them when they are successful.  Don’t allow an entitlement attitude to exist in the company.  When was the last time you wore your “investors” hat?