After years of running various small businesses I have finally come to conclude that people are bad for your profits! What made me arrive at this conclusion? Well obviously it’s a very broad statement & people are not always bad for profits. Of course they are not, as many businesses make all their money by selling to the end consumer. But I believe there are better ways for people looking to set up a small profitable business than dealing direct with customers to make their money.
When considering about 50% of small businesses fail within the first year you need to make your business as smooth & efficient as possible. Especially if there are only a few employees or you are the only employee.
This is where people are bad for your profits. Dealing directly with the customer in order to close a sale & then thereafter support the customer if/when any future issues arise will be a major drain on your very limited resources. How much time can you really afford to spend on each customer to make X amount of profit? Do you really have the resource to be able to provide the after sales service as well, which will enhance your reputation in the community & hopefully earn you more sales? If you don’t provide a good after sales service you will soon get a bad reputation & your business will fail before it has even begun! I believe this is the mistake many people make when setting up their small business, the reality of the time required to deal with customers directly and still make a profit.
People are all different as are their requirements. This is the variable that makes it hard to automate any business where you have to deal directly with the customer. I believe that letting the companies already geared up with all the logistics of dealing direct with customers is the key in setting up a profitable new business with minimum overheads.
The key to making money in business is how can you serve more people & in turn generate more money? But after what I have just talked about we want to serve more people without draining company resources. Well if you are looking to set up a new business I would look at setting up an online business & sell other people’s products or services through your website. This means you can concentrate on generating your online sales & let the company who you are representing deal with the customer. This way if you generate 10 sales a day or 1000 sales a day it makes no difference to the load on resources within your small business, let the company you are representing deal with the extra costs and you concentrate on making the sales & more importantly money!
If you are successful in this and start making good profits with low overheads then maybe you can look at expanding your business in to different areas but at least this way you are giving yourself a chance to beat the statistics.
Until you have established a cash generative & profitable business people ARE bad for your profits!