The majority of the business end up failing within the first few years. Many of the business failures are due to inability to generate enough profit.
Among the many reasons why business is not profitable, we find the top three reasons are Low Price, Too Much Overhead Costs, and Market Competition. Check the following paragraph to find how these factors affect your business and how to avoid them.
You Do Not Charge Enough
We have met many clients who offer excellent service, yet the business still failing to make a profit. Often what we find is the solution is straightforward. CHARGE MORE! Do not worry about losing the client. If you are confident about your service, then you should market yourself in the high-end of the market. The best customer pay premium for quality works and they pay on time. As we will discuss latterly in this blog, the low-end market for many industries will become more and more competitive under the current economy. It is better to get your skill recognized and put a reason margin for your work.
You Carry Too Much Overhead Cost
What does the reasonable overhead cost? The cost varies by the different industries. But generally speaking, you should be very careful about the wages. Many small business owners fail to budget the reasonable charge rate and the pay. Also, many businesses work on project basis find it hard to manage overhead cost when there are not enough projects. If this is the case, you should consider hiring subbies whenever possible.
The competition may not necessarily be a bad thing for the industry. But compared with a few years ago, when tradies can do a decent job and get lots of work from the clients, your old marketing strategies may not work so well today. Given the fact that we are still far away from next mining boom, you should expect heavy competition to stay for at least two to three years. Especially in the state of Victoria and New South Wales. Developing the marketing strategy and build the relationship with your client is more important than ever.
And all these reasons linked to the market awareness. Bury your head in day to day business operation and not being able to see what is happening in your industry and your business create the hidden risk. Thus why you need to take the time to review your business from time to time. Contact the business turnaround specialists at our Melbourne office for a free business health check.