In Zero-Sum Game, there is always a winner and a loser. As a small business owner, you could unknowingly be involved in a Zero-Sum Game! Let’s discuss how you might be.
SMEs generally operate more closely with the consumer than manufacturers and large service providers; they buy goods
and services, add value through transformations, repackaging, and distribution, and then earn a profit.
The question is?
Can you confidently determine your profit and how do you quantify your profit?
1. Is it your cost plus a percentage?
2. Is it just an amount included in your selling price on the assumption that your selling price is adequate?
3. Is it based on a formula where for example a third of your price is considered to be your profit?
4. If you are distributing a service, it is your time? What is your rate?
As these questions show, without data and a pricing system (i.e. benchmark; cost plus), you could be in a Zero-Sum game where the suppliers of your goods and services are actually the real winners while you are picking up the crumbs.
Why do most small businesses not perceive this abnormally, hence failing to implement corrective measures?
The main reason is the common misconception which is rooted in the heavy reliance on the liquidity-driven management style instead of facts, metrics and data.
Having cash in your bank account does not necessarily translate into having made a profit.
Managing your business from a data perspective (don’t compile your data for tax filing purposes only) will guide your pricing and ensure a consistent margin on every sale or order.
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