Have you ever been persuaded that the only solution to the problem of low income and, what follows, low profits is to increase your revenue by boosting your sales volume? And that eventually you will have to decide whether to maximise the revenue or the profit?
Nearly every day, I hear the same old song while watching commercials on social media:
Do you want to boost your business income? Boost your revenue!
And how to boost it? By boosting your coverage and by reaching potential clients for your products or services. And how to do it? How?! Just boost your marketing budget and use paid commercials in social media and maximise your sales!
“What if we don’t have money to increase our marketing budget…?”, someone may ask. Well, here the problems start. You can come across various pieces of advice, such as: take out a loan or invest your personal savings, for if you don’t invest in marketing and advertising, then what kind of business owner are you?!
Personally, I got sick and tired of such a narration popular on the internet. That’s because it considers coverage and commercials as a miraculous remedy for the problem of too low income and profit. It irritates me even more, as I’ve met plenty of entrepreneurs whose profits from investing money in coverage and web traffic marketing were practically close to none. Naturally, they managed to maximize their revenues and their sales figures went up… but at the same time their costs increased, too, so the whole action didn’t translate into generating profits. They stayed on the same level, not to say they even fell down a bit!
Hence, after a moment of joy caused by an illusionary sense of the increased amount of cash flow on their business bank account they find out that, actually, they have been staying in the same, if not worse, financial position. The problem is that they have lost several months together with a lot of energy wasted on senseless actions.
Well, these are, sometimes, the results of revenue maximizing!
This same old song turned out to be so catchy that it boldly introduced a sort of a tendency into the topic of entrepreneurship. It tells you that first, you have to develop coverage and recognition, then maximizes sales and reach the highest revenue or income possible. The POINT is to sell! This is what business is all about!
If we add a deeply-rooted view that thanks to social media we get unlimited access to masses of people, and so it’s enough to invest in advertising cheap products (so that price wouldn’t be an obstacle to purchase), the results are easily predictable. Plenty of entrepreneurs follows the crowd in generating paid, organic and partner coverage to maximize their sales figures!
All this seems to be a proper action, so where’s the problem? Shouldn’t we invest, then, in marketing and advertising? Should we stop striving to increase our sales results?
Of course not! So, what to do and what is the source of this problem?
I would say that the problem results from the momentary amnesia of entrepreneurs who drive their businesses to the verge of bankruptcy. This amnesia concerns the core principle of any business. And it is not about maximizing the revenue. What I have been taught is that when you have to choose to maximise revenue or profit, you should definitely maximize in your business is the PROFIT!
So, high sales results for products that don’t bring you many earnings. That also require either ample marketing funds or a lot of time engagement on your side (and time is money) won’t generate the desired income and, by the same token, high profit.
Remember that high sales do not always mean high profit! Especially when it turns out that the price of your products barely covers their costs, not to mention your remuneration!
So, what should you do?
Check the strategy that you follow so as to see whether you haven’t fallen into the pressure trap of being constantly present on the internet, increasing your products and services marketing budget when their price can’t bear all the financial and time expenses. Also, check if you’re maximising sales without even considering whether you still gain your earnings or you break even.
What business is all about, after all, is to combine helping your clients solve their problems by means of your products and services with earning money on selling them so that to generate income and, what follows, PROFITS!
What if you’ve fallen into such a trap or you don’t know how to modify your product? Or if you still don’t have a clue whether you should maximise revenue or profit? Or if you have no idea how to calculate its adequate price and select proper marketing tools so as to generate profit? Then, I invite you to arrange a 60-minute strategy session with me. Together, we can get your business out of the woods and concentrate on making it a profitable activity.
I will tell you what makes it impossible for you to earn income. Moreover, I will see whether I am able to transform your business model and strategy with you so that to turn it from a revenue-generating business into a profit-generating one.
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