I recently met with the owner of a Tucson business who was in a precarious position.
For many years the business was healthy and profitable. In fact, they had been nationally recognized as an industry leader. However, there is a major problem and his business is now heading in the wrong direction. Revenues and profits are down and if the trend continues, he will be forced to close his business.
The first thing we did was a quick market analysis to see if external factors like competition or changes in technology were causing the problem. It was not an external problem so we looked internally at his business. The cause for concern quickly exposed itself.
A few years ago they started to offer additional products and services related to their core business. They offered these products and services at a discount to gain market share. Because the prices were discounted, the profit margins were tight to begin with.
His human resources became stretched too thin, especially in the marketing department. The marketing team could not adequately handle the increased workload, even though they were working overtime. The quality and depth of every marketing campaign suffered, which resulted in lower client conversion rates and increased payroll expense.
The combination of discounted prices, low profit margins, reduced efficiency and increased expenses was a recipe for disaster.
The solution is simple and provides a lesson we can all learn. Do what you do well and focus on your core business. Instead of expanding products and services, dedicate your time to capture additional market share in your field of expertise.
The business owner went back to basics and reset his priorities. He now focuses on the core business that made him successful.
