A true entrepreneur and business owner are always seeking new opportunities to increase revenues and improve the cash flow of the business. The primary objective is to organically grow your customer base by doing more events and increase the cost of your services in line with market conditions. As many have experienced it takes time and patience to stay the path without adding additional options to your service offerings. Since the advancement of technology in our industry, we have all taken a rapid trajectory upwards in amassing a van full of lighting and entertainment equipment. For the majority of mobile DJs, this has been a beneficial track to take, however, I have observed a significant increase in those looking to unload “the van”. The revenues anticipated from these purchases have fallen far short of expectations.
Why then have others found success in adding additional services to business while others felt the pain of a financial loss? The most common response is there was no market for what I was offering or better yet, “I overestimated what I could earn on this investment”. As we become starry-eyed at all the latest in technology we become blinded financial by common business practices. Therefore the phrase “Sell IT before you Buy IT” can be a lesson in small business financial management.
What does it mean to Sell It before you Buy IT? You determine a market for a particular product or service and you “pre-sell” it before investing the cash. To illustrate, I can share firsthand how it worked for me. As we all jumped on the bandwagon to sell up lighting several years ago, I knew there was an increasing market for couples wanting to transform a venue with lighting. The question for me was of the weddings I booked, how many would buy uplighting packages and how much should I invest. After some research and feedback from other business owners, I embarked on the following steps:
- I determined a budget that I would spend on the equipment and set that in stone.
- I established a baseline of the number of lighting packages I needed to sell in the first wedding season. The baseline that I established needed to cover the cost of the equipment and a reasonable profit.
- I added an uplighting package to my offering of services on my website, in conversations with clients and proposals for services.
- Upon achieving my baseline of services sold, I purchased the equipment.
These four basic steps kept me on track and in line with my expectations for adding to a profitable bottom-line. Conversely, those who did not achieve the same results based their decision on the following premises:
- It’s the latest trend and everyone will buy it.
- My competition is offering it, therefore I need to offer it to be competitive.
- I am not making money so If can supplement my income with something else I will be profitable.
As a commercial lender and has financed hundreds of small business owners during my career, taking the latter approach to justifying an asset purchase for your business ultimately resulted in disappointment and failure. Basic financial discipline and common sense will enable you to continue on an upward path of revenues and bottom-line profitability.