Should You Continue to Do Activities That Lose Money or Break Even at Best?

August 24, 2012

Business, Finance

Sometimes the answer is obvious, sometimes it is not. Here are some potential situations to consider:

Participating in a community event. You’ve done a raw food demonstration there for several years but it never results in any sales. You hate to say no, and don’t mind helping out but…

Distributors that disappoint. A couple of stores that carry your hand made jewelry signed up in the early days of your business and you were so grateful for their support. However, even though they don’t sell much they require you to drop by and re-stock every 2 weeks.

Free farm or garden tours. When individuals take a tour you expect them to make a purchase from your store, but last week you had a large group that bought very little. This after a 1 hour tour turned into a 2 hour visit and you fed them homemade cookies.

Making a decision on whether to continue these activities or not can be difficult. Here are some questions to consider:

Is the main goal of your business to generate revenue? Would you like to rely solely on income from your business some day? If revenue is a key goal, you need to use your time wisely to make sure the income you need is created. (If you aren’t focused on income, know what you are trying to achieve and make sure your efforts help you reach those goals!)

Could you adapt how you handle this activity to generate more revenue or attract more customers? For example, are you promoting your participation in the community event to generate publicity and credibility for your raw food coaching business? Could you post pictures from the community event on your Facebook profile?

Are you reaching your target audience with the activities? Are you meeting potential customers who are really interested in what you do and would be great customers? Is there a way to collect information about the people you meet – either through an email sign up list (preferred) or a ballot draw?

What is the opportunity cost of these activities? (This is a big one!) For example, if it takes 4 hours to prepare and offer a group tour – what other activities could you achieve within those 4 hours? If it takes 3 hours to visit the 2 stores that don’t sell very much of your jewelry, could that time be spent finding new distributors, or producing more product?

Is there a middle ground? Instead of saying no to an activity entirely – can you find a way to make it fit better with your goals? For example, could you charge a small fee for your garden tour and in exchange attendees get a coupon of equal value for products in your store? Could you have a conversation with the stores carrying your products and agree to re-stock every 2 months instead? For participating in the community event could they recognize you as a sponsor in their marketing materials?

Be brave as you move forward! You are making a BUSINESS decision, not a personal one. If you have asked the above questions and considered various options you have thought through the decision carefully. Try not to feel bad. Think about the potential positive outcomes of your decision.

Last but not least, be sure to use this experience, this decision, as a learning experience. If you applied this decision process to other activities could you improve them? Use this process to evaluate future opportunities as well.


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