Tuesday, October 28, 2014

What Are You Managing: A Business Or A Non Profit Organization?

 A Business Or A Non Profit Org? 
A few weeks ago, having an after dinner conversation with some friends, this subject came up: “What are we managing?”. I commented that the goal for any business should be selling, building profits, and one of my colleagues argued that it wasn’t like that, that it was probably done this way many years ago but not anymore. He said that nowadays a business’ goal was to satisfy customers, putting customers at the center of everything.

And maybe it's like asking "What comes first: the chicken or the egg?" because in order for your business to satisfy a customer, it needs to have actual customers. In order for a customer to become “satisfied” by your business, some sort of transaction must have been generated, the exchange of a product or service must have occurred to assist the customer in  solving a particular need or problem. What other ways can a customer be satisfied by you, if it isn’t by solving a problem?

What other reason would push the customer to approach your business to begin with? Perhaps sole curiosity? How long can you keep your business running if you only get visits from "curious" people who don’t buy?

I do recognize this kind of questioning might sound like common sense, but it happens more often than not to business owners to get confused about what their real goal is. It’s often necessary to go back to the basic concepts and remind yourself what goals were you expecting to achieve with your business, and I mean if we are really managing a business, on the proper meaning of the word itself.

Businesses are created to generate economic profits, regardless of the business model you choose to use.

And that’s why it is so important to have all things perfectly clear in your mind: If you own a business, your goal is for it to become profitable, generate earnings, perhaps in a year, two, three or five... but at the end your goal is to have a profitable business, meaning you are bringing in more money than the one going out, so that at the end of the year you have some cash remaining in your account.

Let’s start by talking about time, money and the effort it takes to manage any business. 

Some people say it’s good to put the dots on top of the “i’s” from time to time, to avoid any confusion that could be potentially costly, and I don’t refer exclusively to monetary costs, at this particular point.

I am sure we all will agree that managing your business not only costs you money, perhaps a little if you have done your homework implementing “bootstrapping" techniques, but certainly you have to invest some money to make things happen. But it's not just money you have to invest in your business.

If  you were to assign a monetary value to each of your working hours, you would soon realize how much it costs to manage your business. 

In addition to this investment in money, managing your business also demands a significant amount of time and effort. And if each of your working hours had a face value, you would immediately realize your business has a real cost, and is generally quite a high one.

How long can your pocket support a business which doesn’t generate profits? 

Obviously when we reach this point in the conversation, everyone frowns and shrugs. The answer is always "just for a limited time." Or at least, it is most of the time.

It can be "very, very limited time" when the pocket would only hold for a couple of months of operation without generating profits, or "moderately limited" when you've done your homework properly and have set aside a capital that will allow you to cover your business’ operations for a longer period, perhaps a year or two.

No single pocket can hold a business that produces not profits forever. 

In any case, the answer would never be "for as long as you need", and if it were so, then you’re not managing a business but a nonprofit organization: you're basically spending your time, money and efforts on an activity that could easily be considered a hobby instead of a business, and nothing else.

You might now be wondering why I place so much emphasis on a subject that should be completely clear to all  entrepreneurs and business owners, or to those guys who are planning to launch their own businesses in the near future. The answer comes next.

If you know where you're going, you can choose the way that better suits you. 

Humans have the ability to turn simple things into complex concepts, and we have taken on the habit of coming up with new names for things that continue to have the same meaning they have had throughout the whole life, such as what the goal of any business should be.

Having what your business goals are completely clear in your mind, allows you to better choose platforms to be used, and plan much more efficiently all strategies and actions to be executed to promote it, increase awareness about it among people, bring in more sales and, consequently, to create better opportunities to generate profits.

In addition to all that, you’ll have the main performance indicator that will tell you whether you are doing things right or wrong. As I stated on a post published in this blog a while ago:

"Everything you do, must generate either money or happiness, or a combination of both." 

If what you're doing, is not helping you make even money enough for a living, then you must make sure it’s generating a lot of happiness. And if you call it “a business”, then you certainly have to make sure it’s generating profits.

A big hug and thank you for allowing me to share these thoughts with you. I hope you find them useful in managing your small, yet big business :-D

If you have time, you may want to read the following post in this blog:
4 Easy Tips To Effectively Managing Your Time.

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