Sabrina Starling PhD, PCC, BCC

Barely Breaking Even in Your Small Business?

 

Help_iStock_000016562476XSmall_APR1615It’s tax season. Do you hear the collective groan from small business owners across the country? Are you one of those small business owners who is groaning?

Do you find yourself working harder and harder, year after year in your business, only to get your taxes done and learn you’re barely breaking even? It’s frustrating, demoralizing and discouraging. Many small business owners end up blaming themselves. Is there something you are doing wrong?

If you are barely breaking even in your business, or worse, losing money and continually operating in the red, rest assured you are not alone. In fact, the majority of small businesses in the United States barely break even.  Out of 28 million small businesses in the United States, 22 million are breaking even. That’s right. Only 6 million of the small businesses in the United States are profitable.

Why is it so hard to be profitable in small business? Theoretically, all you need to do to be profitable is to make more than you spend. But, it rarely works this way. Why? The reason lies in our human nature.

It is our human nature to consume all of our available resources. This is Parkinson’s Law. It applies to toothpaste, dieting, AND the financial management of small businesses.

Parkinson’s Law states that our demand upon a resource tends to expand to match the supply of that resource.

Think about it. When you have a brand new tube of toothpaste, it’s likely you fill your toothbrush with a long bead of toothpaste to brush your teeth. As you get down to the end of the tube, you squeeze out the last little bit to brush your teeth. Either way, your teeth get brushed. But when you have a large supply of toothpaste in the tube, you use a lot. This is Parkinson’s Law in action.

In my home, it’s the bag of chocolate. When my bag is full, I grab a handful of chocolate to eat  when I resume my workday after lunch. When the bag is almost empty, I take one or two. When it’s gone, I don’t eat any. (In fact, it’s best if I don’t even buy the bag of chocolate in the first place!)

How does Parkinson’s Law apply to Small Business?

The majority of small business owners practice “Bank Balance Accounting” to make financial decisions in our businesses. When we are contemplating a major purchase, we log into our bank account to check the balance. If there’s a good bit of money in our checking account that day, we move forward with the purchase. If our balance is low, we may postpone the purchase or pass on it all together. This is Parkinson’s Law in action. We spend what we have.

Parkinson’s Law explains why so many small businesses are not profitable. When revenue increases, so do our expenses. In fact, what typically happens is that our expenses increase prior to our revenue increasing. Yet, our revenue never seems to outpace our expenses so that we can be profitable. In many cases, expenses typically outpace revenue, which results in the business barely breaking even. This is why a business owner making $1 million or more in revenue still loses sleep at night worrying about cash flow—just like he did before he grossed his first $10,0000.

Clearly, not every small business owner falls victim to the detrimental effects of Parkinson’s Law. Some small businesses are significantly profitable and thriving. What is their secret? What are these owners doing differently than the majority of small business owners who are barely breaking even?

They are harnessing Parkinson’s Law to their advantage. The majority of what these profitable small business owners are doing is very similar to what the rest of small business owners do. Yet, they do a few things differently. It’s these few things they are doing differently that are responsible for their consistently strong profits, year after year, in their businesses.

If you want to know more about these small, simple changes you can make to drive profit in your business, join me for my upcoming webinar, The Secret Profit Formula for Rural Business Owners* I will reveal the exact system I use to drive the profitability in my clients’ businesses up to 10-15% or more, year after year.

Just imagine…you could end the year with 10-15% profit and be rid of your cash flow worries once and for all. Join me and learn how.

*Not a rural business owner? No worries. The same strategies I teach my rural business owners work exceptionally well in urban areas, too. In fact, many of these strategies work even better in urban areas. Consider yourself privileged to get access to these “insider” tactics to drive profitability smiley

Article written by :
Sabrina Starling PhD, PCC, BCC
Dr. Sabrina Starling, The Business Psychologist™ and author of the How to Hire the Best series is the founder of Tap the Potential. Tap the Potential specializes in transforming small businesses into highly profitable, Great Places to Work! Never one to accept status quo or back down from a challenge, Dr. Sabrina’s How to Hire the Best series grew from her desire to solve the toughest hiring challenges interfering with her clients' growth and profitability. What sprang from her experience working with entrepreneurs in rural areas catapulted her into becoming the world's leading expert in attracting top talent in small businesses — no matter what hiring challenges those businesses are facing — and earned Tap the Potential’s reputation as the go-to resource for entrepreneurs committed to creating Great Places to Work with thriving coaching cultures and highly engaged team members working from strengths. With her background in psychology, and years of driving profit in small business, Dr. Starling knows what it takes to find, keep and get exceptional performance out of your biggest investment — your team members. Visit Dr. Sabrina and the Tap the Potential Family at www.TapThePotential.com. While you’re there, be sure to check out all the great resources, including Dr. Sabrina’s most in-demand webinar, How to Make Your Time Worth 10K an Hour.
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One Response to Barely Breaking Even in Your Small Business?

  1. jane says:

    Hello,

    thank you for words of wisdom,enjoy your day ma.

    jane

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