To answer the question “How much profit should my business make?”, we need to look at the market cost of the resources it uses.
You probably already pay market prices for your supplies and staff but the two areas that may be heavily subsidised are what the business gets from its owner – management time and money invested.
Lets put a value on your time.
The Market Cost Of Your Time
I want you to look at what you do in your business – all the many hats you wear from salesperson, copywriter and Internet expert…to the things necessary to deliver your product or service…to the administration and bookkeeping. [continue reading…]
Just like our earlier bank account example (link to the economic definition of profit), the money invested in your business could be earning a nice safe return in the bank…or you could aim for a higher but riskier return elsewhere.
You may have also given personal guarantees to your bank to secure a loan so your business is getting more money at a lower interest rate – and you should recognise that cost. [continue reading…]
It’s common practice to think about maximising your return on money invested and to have some kind of measure to track it but do you consider how to maximise your return on time?
The twin problems of:
- Lack of time; and
- Having too much to do;
are common issues for business owners and they can contribute to the business getting stuck in a rut. The business owner wants to move forward but seems unable to take the actions necessary.
This is why the thinking in the Stop Start More Less Matrix is important. It recognises that, to do something new or to do more of something good, you have to buy time from yourself.
Time is finite. No one has more than 24 hours in a day or 168 hours in a week.
Your task is to get the most out of the hours you choose to work in those 24 hours. In other words, your aim is to maximise your return on time. I first blogged about Return On Time in June 2009 while I was thinking about the importance of respecting the attention and time of your customers. [continue reading…]