Will These Dollars Make Sense or Cents?

As small business owner, we have a tremendous opportunity to turn a dream into a reality and create jobs for others. Sometimes we become so determined not to run out of cash we take every job that comes our way. While risks come with every opportunity, you do not have to take every gamble.  These are 3 Things to Consider when evaluating an opportunity.

Do I have the right pricing strategy?  Know your numbers. This means more than knowing what the top-line revenue will be. The goal should be to grow profits, not simply revenue.   Don’t undersell your products and services to drive a high-volume. Precise pricing attracts the right buyers who are willing to pay for quality. Regular discounting establishes a price orientation with buyers and minimizes gross margin.  Make sure you evaluate all your hard and soft costs and establish your breakeven point. If you can win the business after adding a margin for profit, the deal makes sense.

Do I have the right customer?   Trust but verify.  Sometimes we become so excited about the customer’s name we fail to clearly understand the customer’s payment practices. What may be invoiced at Net 30 could turn into Net 90, or even worse Net Never.  All the cash flow in the world is worthless if it is not positive cash flow.  Do the research.  A customer that consistently does not pay according to the negotiated terms will turn your dollars into cents.

Is it feasible?  This means more than can I do the work.  Our goal is to create and offer value.  Determine your capability risk.  A business may have a great market and appear very attractive but if you can’t deliver on the marketing promises, then unhappy customers will create chaos and ultimately destroy the brand. Negative word of mouth can be even more powerful than positive recommendations.  Ask do I have the expertise, capital and capacity to make my customer happy?  If the answer is yes, these dollars make sense.

As entrepreneurs we've learned to fight for what we want, and hate losing. But not every fight is worth our time. The trick is to always remember the big picture and to not allow your ego to get in the way of being productive.  There is a big difference between perseverance and stubbornness. Stubbornness involves forcing things to work, while perseverance means working consistently with what's already working.  If you are confident yet humbly and honestly assess the situation you will be able to make good decisions that will ensure your dollars make sense.

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