Following the Right Path
You must find your own path to profitability
I took a hike in the desert last week. Desert hiking is actually much more interesting than it sounds, but it can be tricky at times because of the lack of markers along the trail – things like big trees or streams that often serve as landmarks in other climates.
Although I have a great hiking app on my phone, I chose to keep it in my pocket instead of using it when I came to a fork in the trail. Why? Because at that fork were another group of hikers who said that the left fork was the correct path. So I followed them.
Nearly 1.5 miles later, I noticed that this small group of hikers ahead of me had turned around and were coming back towards me. When they passed me they told me that they had made a mistake at the fork and were turning around. This meant that I had added about 3 miles to the hike, just to get back to where the trail fork was – an extra hour of time. Because I only had a limited time to do the hike, I had to turn back at the fork and return to my truck without experiencing the unique cave this hike would have led me to.
As I walked back, I vowed never assume that another hiker had the right information for me. Instead, I would always check my trail map to be sure I was on the path that I needed to follow.
Finding and following the right path for your business is critical to getting the results you work so hard to achieve. Following the path of other businesses can have negative consequences on your results. One example I often see is shops that use the same pricing strategy that others are using. They see that the competition might be charging less, so they reduce their pricing. They buy a point of sale system and assume that the default pricing in the new system is correct for their operation.
“Finding and following the right path for your business is critical to getting the results you work so hard to achieve.”
The truth is that shops only reach their full profit potential by finding the path that is right for them. Every small business has a different cost of operation. Some pay higher rents than others. Some employ more than others. Some pay their employees more than others. Some pay the owners more than others. Some carry large amounts of debt while others have no debt at all.
The only way to ensure your path to profit is correct is by customizing your prices to cover the cost of operating your business and adding extra to ensure you are building enough cash reserves to cover growth and unexpected expenses. No other custom frame shop has the exact cost of operating their business as you do. That means it very likely that the pricing strategy used by another shop will not produce the same profit for you. You must find your own path to profitability.
Now that 2020 has ended, you can see what it cost to operate this past year. Determine how much you need to markup the materials you purchase to cover your company’s unique operating expenses and also to create additional cash reserves. Doing this will ensure you are on the right path.