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Disclaimer: Neither Charley nor James are offering financial advice. This is a discussion and opinion only. Please consult a professional financial advisor for your own situation.
Editing note: Charley’s site is now Business & Investing
One of the major obstacles for business owners, when it comes to wealth building, is a lack of profit. So James and Business & Investing’s Charley Valher have gotten together to list the unseen factors that lower profit margins.
They’ll talk about the effects of drama in the workplace and out of it.
They discuss the role that hiring and training the team play.
And you’ll learn the importance of embracing and adapting to business changes.
Table of contents
1. What’s a good amount to invest each month?
2. How drama can derail productivity and profit
3. Personal drama is just as harmful to business
4. Beware of bad hiring
5. Are you training your people enough?
6. Know when a trend is dying
7. The importance of embracing change
8. Sometimes it pays to stay the course
9. Expect a part two
9 Invisible Profit Killers – Part 2
What’s a good amount to invest each month?
Charley has said it in previous episodes: if you’re a business owner, one of the key things you should consider doing is taking some of your profits, and then investing them outside of your business. This banks against risk and paves the way to a future where you may no longer need to work.
Many business owners love the idea. The common roadblock, however, is they simply lack the extra profit to invest.
How much are we talking about, asks James?
The number Charley sets for himself is $5,000 a month. He realizes it’s not a small amount, but when you’re at that stage he feels you can make significant moves.
Until then, he says, you’re likely better off investing in your business to achieve that level of growth.
Now Charley has found many people don’t have that amount of extra to invest, and in probing, he’s narrowed it down to a number of main reasons, which he and James will discuss.
They’ve counted nine factors in all that could be causing a business to lose money and lower profit margins. And these are non-obvious, insidious things that business owners wouldn’t typically consider.
How drama can derail productivity and profit
Number one is drama.
It sounds unusual, says Charley, but he has a friend whose business is in conflict – two business partners are in constant battle with each other. And it amazes him, the time and energy they spend fighting instead of looking to the productivity of the business.
It doesn’t take a business partner to create drama. An organization or a team might be high drama, or clients, where there’s always something that needs fixing when the business could be delivering work.
So Charley thinks drama is a massively hidden expense in many businesses.
James thinks so too. Almost everyone he coaches brings drama to the table, and he pulls it out.
He personally lives by a former mentor’s mantra: Celebrate lack of drama. So when someone turns up to a group call with nothing to report, no issues or emergencies, James feels he’s done a good job.
Personal drama is just as harmful to business
It isn’t just drama in the workplace that can impact a business. James would say spousal problems are common for entrepreneurs – there’s often a conflict between the driven, creative business owner and the partner who’s trying to manage other areas of life.
James has seen entire businesses shut down by marital disputes, and helped many a client through a difficult family situation.
If someone has a very dramaful personal life, says Charley, the likelihood that they’re being as productive as they could be in business is probably very low.
James often says, you’re not just in business with your partner, you’re in business with your partner’s spouse, or your partner’s partner. He makes a conscious effort that everything he does with a partner be spouse-approved.
Beware of bad hiring
The next profit killer is a good one, says James.
He just saw a video of Alex Hormozi, telling about the $500,000-per-year CTO he hired, paying a recruitment agent $140,000. He sacked the person almost immediately, because they were late to three calls and didn’t know how to operate Zoom.
The damage that can stem from a wrong hire is massive. Back in his corporate days, James read one stat put it at $300,000 for a $50,000 or $60,000 a year hire, not the least because of the recruitment process.
At a Mercedes-Benz dealership, failure of a salesperson to close a sale would cost not just the marketing dollars, but the profit they should have brought in.
James has hosted episodes on slow hiring and, more recently, the cost of hiring the wrong person.
It’s an invisible profit killer, he says, because there’s probably people in your organization you would not rehire today based on everything you know. Not in his organization, though, he’s quick to say.
Are you training your people enough?
Next, says Charley, is under-training team.
There’s a classic saying, James says – What if I train them up and they leave? The counterpoint being, what if you don’t train them and they stay?
James recalls, at his debt collection job, he was given 20-year-old cassette tapes from America to listen to.
In his prime at a car dealership, however, they had a video recorder, with which they would role-play selling cars. They had the best team in the country.
James would have his team read books and do a summary at their morning briefing of what they’d learned.
His current team have an Amazon credit card. They can buy any training they need, and James himself will get them whatever course or tool they require to be better at what they do.
Charley finds it fascinating that so many business owners value education for themselves, but not so much for their team.
James and his team aim to be ninja good, always improving, which is why they’ve gotten double the downloads of this podcast since changing their business name. It all starts with training.
Take the time with your team to nourish them, and educate them, and bring them up to speed. Don’t be afraid to pass on the best lessons you have.
If your team’s poorly trained, says Charley, and you’re constantly having to come in to fix things, that’s time not spent on your most productive tasks. So it’s a real profit killer in that way.
Know when a trend is dying
Charley thinks the next point is a critical one: staying in a dying trend.
When Charley first came online, webinars were becoming the thing to do. It was common then to get around 50 percent attendance of everyone who signed up.
Over time, that got harder and harder to achieve. And many people who were stuck thinking they had to do webinars ended up going under.
At some point, you have to examine your business approach and think, is this about to have a Kodak moment? Or, Is this the Blockbuster of this time? Is it time to reconsider our focus?
It’s a huge one, says James. Another way he’d describe it is getting stuck on a platform, something he addressed with OwnTheRacecourse.
People should know that what they’re doing now may not work forever. And so James likes to play a game he adapted from Eli Goldratt’s Theory of Constraints.
He likes to think, if you couldn’t do the thing you do now that brings in all the money, what would you do?
If you’re in a job, for instance, and dependent on one salary, what if you went into business, and got paid by, say, 1000 people? Lose one, and you’d still have 999.
In terms of business trends and growth, it’s good to work out if you’re in a growth or a decline market.
When James had an SEO business, he realized they’d be in trouble if blog networks got taken down. So he had his R&D team seek an alternative.
They found other ways to get links, and survived the big blog slap down, while nearly all their competitors got flattened.
The importance of embracing change
So be comfortable with change, says James. Embrace change, celebrate change, savor it.
Change is what’s going to destroy your competitor. That’s what’s going to take them out.
If you do research and development, if you do a constraints exercise, if you plan on what’s working today not working in the future, you’ll be okay.
And if you look at most famous people in business, they are not doing now what they did back then.
Sometimes it pays to stay the course
The next one, says Charley, is also huge – changing directions too often.
He’s come across people who for whatever reason, be it boredom or a craving for drama, are always disrupting what they’re doing and starting something new at point one.
Charley recognizes that it takes time to get good at something. And most of the rewards come once you’re good at something.
If you’re changing what your organization does, every month or every quarter, the likelihood that you’ll ever become efficient at something is very low. And that would decrease profits immensely.
If one month you’re an agency, and next month you’re a courses and education company, and the next month, you’re something different, you’ve never really gotten good at any of those things. How will your profit ever get to a reasonable state?
Most of the business owners Charley deals with, who are doing incredibly well, tend to stick a course. They tend to develop in an area where they have an advantage or a skill, and that’s where most of the profit comes from.
Expect a part two
James and Charley are about halfway through their list, Charley reckons. It’s an important topic that neither of them wants to rush, so a Part Two may be in order.
James agrees. So far they’ve talked about drama; they’ve discussed bad hiring; they’ve spoken on training the team; they’ve covered the danger of declining trends; and they’ve talked about changing direction too quickly, too often.
That’s five – four to go. Look for that in Part Two of this topic.
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