One of the big challenges we see with clients is they cannot take advantage of all the opportunities they identify.
There may be lots of opportunities, but they have limited;
For example, they cannot get the people they need to take full advantage of an opportunity because of demand for these particular types of people, or alternatively they get the people but a significantly higher cost than they had budgeted for. So they take on work where they do not have enough capability or capacity, and their margins are being diluted.
While there are many opportunities for these particular companies, they often end up dealing with unprofitable clients that are consuming a lot of time and resources.
Where to play
The key for this issue is to determine if the business needs to narrow their focus.
For example – a business was dealing with large corporate clients who were consuming a lot of their resources, the payment terms were stretched and they expected the business to be available on demand. This business also worked with smaller clients where the payment terms were better, they were much more flexible, there was less complexity, less risk and the smaller clients actually appreciated it. The business determined that by narrowing their focus and working on smaller clients their revenue would decrease but their profit would increase.
Is it about revenue or profit?
It should be about profit, what’s the point of doing $1 million revenue when you’re going to make $50,000 profit when you can do $300,000 somewhere else and make $100,000. You’re just busy filling up all your valuable time in the wrong areas.
There are lots of opportunities for businesses and an important consideration when setting strategy needs to also be about what you shouldn’t do.
What is the lesson here?
Pick where you’re going to play, look for the greatest opportunity where there is a match between your capability and the opportunity to make the most profit.
To know more about where you should play, contact your Harris Black team member today.