Your business is a sieve. Why the company is growing, but there is no more money in your pocket

The business formula is very simple. At least, it seems so to us. We want to invest a certain amount of resources up front and get even more resources out. Essentially, business is a machine for increasing our resources. And the more and faster we want to increase the volume of resources, the higher the risk we take on.

The resources we invest are usually in the form of either money or time. There is still strength, energy, etc., but we won’t talk about that here.

And the desire of any entrepreneur is to invest X and receive 2/3/10X depending on ambitions.

At first, by investing X, at the output we get X minus some. Next, as we optimize work and accumulate internal expertise and a client base, we equalize the number of resources that enter the company with the number of resources that leave it. The investment is starting to pay off. We find the break-even point. This is where difficulties often begin.

You invest in marketing and people development, but the end result is wasted time, zero output and zero profit.

Some of the most obvious decisions when growing are to increase revenue and reduce expenses, stretching the difference between the two. This is what we call profit.

To grow revenue, we pour money into marketing and everything related to attracting money to the company. To reduce costs, we cut employees and cut budgets.

And also – we are looking for topics, connections, fighting with all our might for half a percent of conversion, expecting to put the business into a rocket and make 10x in a month. We update creatives, bombard employees with training, but the results do not increase. Sometimes there is also sabotage on the part of the team, which screws up deadlines and acts without much interest in the matter. As a result, at these moments the entrepreneur begins to feel like an Atlantean who carries the entire business on his shoulders.

And while it seems to him from the inside that the business is a concrete slab, which he carries and holds through force, from the outside everything looks different. Business is like a sieve into which you throw more and more of your resources, and at the end you get the same or less. As resources flow through your organization, they do not increase, but decrease: in the form of clients, money, employees and your personal time.

And the king is naked!

In our pursuit of revenue growth, we often miss important details. This happens because our habit is to look at everything through the prism of our competencies. If we are well versed (or we are interested) in marketing, then we try to solve everything through it. If we are interested in astrology, we look for the causes of the problem in the arrangement of stars in the sky.

But if we return to the formula that we talked about at the beginning, we will see that the break does not occur at the beginning of the structure, but somewhere in the middle. Where the resources we launched are transformed and, according to our plans, must be made X so that the output of resources turns out to be more.

Let's zoom in and look under a microscope. In large companies, performance tracking systems help here – analytical reports, dashboards, metrics, etc. But small and medium-sized businesses rarely have such systems.

What to do?

You shouldn't be upset by what you read next. However, there are no magical solutions, “links”, “tricks” that will quickly increase your profits. While chaos and uncertainty reign in your head about what to tackle first, you are wandering in the dark. No, that's not even true.

Imagine that the car you are driving constantly stalls and stops. You press the gas pedal, but the car does not move. If you don’t understand cars, then you frantically go through the possible causes. Is the engine faulty? Battery low? Running out of oil? Look at the dashboard, but nothing is displayed there. Stress increases, you lift the hood, pull hoses, disconnect wires, search for something on the Internet.

Simply put, you start to rush around. And while you are simply going through possible reasons and looking for the true ones, you are wasting time and even more damaging your car with wrong actions.

Of course, if the car breaks down a couple of times, you take it to a car repair shop. They will determine what the problem is and repair it. But for some reason we don’t do this with our business. We think that now is not the time, that we will understand everything ourselves. That “now I’ll solve this problem, and everything will definitely work, and we’ll start that same multiple growth.” However, the desire to close your own project only grows, because the number of difficulties becomes prohibitive.

So no, but what to do?

The first step is to understand that the reason for your lack of profit growth is individual. To accurately identify it, you must see your business through and through. How a doctor sees “through” a person on an ultrasound.

However, we can eliminate some potential diagnoses now. Almost 100% of the time, the point is not that the lead generation system needs to be hacked, and it’s not that people are inert, lazy, irresponsible, indifferent and do not focus on the goal. And it’s not even that you have low productivity. The problem is that you have learned how to grow revenue, but not how to manage internal resources (team, processes).

Growth is the ability to see and take advantage of the opportunities that are at your fingertips now. And for this we need a clear and transparent dashboard, like in a car, which will provide us with a sufficient amount of data. Sufficient volume is when at any given time we see exactly where our bottlenecks are concentrated, we understand which tool needs to be improved to optimize them, and we can numerically evaluate the effect.

About where to start building a dashboard (or compass) in business – wrote here.