Running your service business and making decisions based on the number in your bank account leads to a lot of problems.
One of which is known as the Survival Trap. Service business owners fall into the Survival Trap when they start to feel the stress of a low bank balance and start doing things that could be charitably described as flailing around.
Instead of taking actions to build the business, they envisioned when they got started, they look for ways to escape the immediate crisis. This means going into “Sell Mode” and taking any job with any client willing to give them money.
Take a look at the figure below. This moment of crisis and lack of funds is Point A and Point B is where service business owners want to go (towards their vision of what they want their business to be).
The trouble is most service business owners don’t have a clear, articulated vision for their business. They may have an idea as to what they want, something like “more money and being able to spend more time with my family”, but there’s no clear path from where they are now to where they want to be.
This means service business owners will often take actions that actually take them further away from their vision, in an effort to escape their current crisis.
A crisis in your business is like being stuck in the woods. Without a clear vision for where you want to go, it’s like you don’t have a compass to point you in the right direction, in which case any direction will do.
Any positive action you take will get you out of the immediate crisis situation, it may even move your revenue in the right direction, but without the vision in place, you will probably be making short term decisions that actually move you further away from your goals.
Like choosing a direction at random when you’re lost in the woods, sometimes you’ll get lucky and move closer to civilization, but more often than not you’ll end up even more lost than before.
Not All Revenue Is The Same
Some revenue costs you more, more in time and money.
You need a system and a plan that helps you identify which revenue is profitable and moves you towards the business you are trying to build, and which revenue is a dead-end or could put you out of business entirely.
The Profit First system is the solution to the Survival Trap for service business owners. Instead of using the number in your bank account to base your decisions on, the Profit First accounting system gives you a clear path forward.
Once you get it set up, the Profit First system can give you perspective on what activities drive the most revenue, who your most valuable clients are, and what you should be focusing on to grow your business.
If you want to learn how to implement the Profit First system in your service business, you can click here to connect with us and find out how we can help.