If this question makes you flinch, then it’s worth it to you to explore the answer. About 13 years ago, I started a life coaching business called “Momnificent!” I was passionate about coaching mothers, and I poured my heart and soul into this “business.” Thousands of my own money was spent branding, marketing, and creating products to sell. My newsletter list grew; my speaking career grew, and I even had some coaching clients. I sold my book and other information products I created. Moms all over the globe loved Momnificent!
But my biggest year, in eight years of business, was $30,000 in sales. I never drew a salary, and all my profits were poured right back into the business. I worked for FREE! Years ago, I would have been embarrassed to tell this story, but today I can embrace the fact that I was not running a business. I was pretending to, but truthfully it was just a creative pursuit, and at best, a tiny non-profit.
Since my first attempt at entrepreneurship, I have learned a lot. And I want to pass on a few questions to help you decide whether your current business is viable, and worth pursuing.
Is there a demand for your product or service? Your product or service could be super cool, and in your eyes, the creative solution to a problem in the marketplace. But if people aren’t interested, then there isn’t a demand. It could be a problem in your sales or marketing process. It could be poor timing. Or it could be that your product or service is just not viable. In my Momnificent! business, although people raved about my business idea, moms simply would not spend enough money on life coaching.
Do you have an interested target market? Your product or service could be popular, and in demand, but perhaps not for the target market you’ve selected. Or what happens more often with new business owners is that they target everyone. In a sense, this is like targeting no one. In my current business, Virtual Office Manager, not only is there a need for my services, it is clear who I do business with – professional coaches, therapists,
Are you pulling a salary? Or are you working for free? If you cannot pay yourself, what is the purpose of owning and running a business? Even if your business is new, you need to be able to pay yourself something. It might be a small salary, but it should grow as the business grows. Even start-up companies with essentially no sales, have investors that enable you and staff members to get paid. Today, I pull 50% of my net income as salary. I set aside 25% for taxes and keep the remaining 25% profit in the business for expenses.
Are sales increasing? In the beginning, sales are always zero. But a company can only sustain itself for so long without generating and increasing sales. Take a look at your sales figures month after month. Are they steadily growing? If not, why? You may have to go back to the drawing board. Look at every aspect of your business and figure out what’s not working. Where are the weak links? Marketing? Sales? Quality Control? Customer service? Is your industry changing and you haven’t prepared your business?
What is your profit and loss statement telling you about the viability of your business? Are you looking at your P&L on a monthly basis? Increasing profits is usually a good indicator that business is going well. Declining profits means you are heading for trouble. You are spending too much money, or you don’t have enough sales. In my opinion, a business that is consistently unprofitable needs to be evaluated for future viability.
Are you meeting your financial goals? For your business to be considered “viable” for you, what financial goals have to be met? What’s the minimum salary you will accept? What are your sales goals? How much profit do you want to experience? If you don’t have any financial goals, it may be time to set some. If you meet your goals, set higher goals. If you fail to meet your goals month after month, year after year, stop spinning your wheels. Either choose to regroup, or throw in the towel and try something new.
You are not a failure if you determine your business is not viable, but it does not serve you to put your head in the sand and ignore it if you do. You can learn from your mistakes if you do things differently. Whether you choose to make changes in your current business or move onto something else, it’s all part of the growing process. But remember, the numbers are important, and they tell a story about your business. The numbers don’t lie, so don’t ignore them.
I learned from my business ventures with Momnificent!, and continue to learn today with my new business. But rest assured, I will not wait eight years to decide if Virtual Office Manager is a viable small business.
Are You Running a Viable Small Business or Pursuing a Hobby?
November 7, 2017