Profit is Not Necessarily Your Financial Purpose
I’ve separated financial from business purpose. If you want to make a lot of money, having a clear business purpose is essential. Your business purpose generates enthusiasm, while your financial purpose is essential to drive your business purpose.
Usually at this point the marketing guru talks about “smashing it”, explaining how you should focus on some massive sum on the grounds that if you aim for the stars you should at least hit the moon! I take the view every one of us wants to sit under our own fig tree. We’re not all going to hit the stars or even the moon; there isn’t enough money in the world. But there’s no reason we all cannot do better than break even and so achieve security for ourselves and our families.
So, not every business person is in the game for vast sums of money. For many business people their business aim is most important but they still need a clear financial purpose.
The important thing to understand is your financial focus. You need to get away from simple formulas where you aim to make so much money in a certain amount of time. Your focus is more important. Let me illustrate.
Imagine a coach who is starting out. Their financial purpose is likely to be increased sales. They need clients. No clients and they don’t have a business. They have no testimonials and no experience to show evidence of their skills.
However, this will not go on forever! A successful coach will reach a point where their capacity is outgrown by numbers of clients. Chances are this will happen before they meet their financial target. So, another option is to change their focus to increased revenue. One way to do this is to increase prices. If the coach is established and has a lot of prospects, this can be effective. Another approach may be to offer more products and services to existing clients.
The latter approach may be thwarted if new products and services also make claims on the coaches’ capacity. So, another option may be to employ staff. This means a coaching business with minimal costs will start to have significant costs. At this point profit becomes more important. You need to aim for maximising income while minimising costs. You will have increased costs because you employ someone. You need to plan to manage these costs whilst being a fair employer.
So, you see your financial focus can have profound implications for how you run your business.
There are other financial aims but hopefully, this illustrates the need to be clear about your financial focus. If not, you will become stuck at some point in the growth of your business.
You need some idea of the amount you need to be viable. You can calculate a breakeven point by adding together your business costs and your living costs. This will never be enough because you will have contingencies and so need to add an estimate of costs over and above everyday essentials.
At this point you can aim for the stars, if that is your wish. You know the least you need to keep going and so you can dream of some bigger sum of money and aim for that. This works for some people.
But many business people are not in business to make huge amounts of money. They are in danger of underestimate their needs and under-achieving for their business in consequence. After all higher income strongly implies greater impact on your business purpose.
But it is also easy to lose sight of your lifestyle purpose. There will be costs attached to your lifestyle and so you need to consider what you need not only for your business but to fund the lifestyle you need to support your business. More next time.
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