Business owners often struggle with financial issues. Examples are finding additional sources of revenue to keep cash flowing, and controlling cost factors that can prove crippling. In some cases with owning a business, the vicious cycle is unending.
Consider soft drink companies that discover revenue streams with certain products or market areas. They carve niches in those areas and pursue market share against their competitors. At some point, market saturation occurs and while the revenue stream doesn’t dry up, it doesn’t produce at the same level consistently. In fact, it may slowly ebb.
The solution is to look for alternatives. This is where professional consulting advice can prove valuable in assessing market acceptance. Adding new consumers in different markets is one option. Adding different products is another option that involves the risk of diluting the existing market. Instead of owning 40 percent of market share, the company has divided that percentage into – perhaps – 30 percent for one product and 10 percent for the other.
The company has also incurred the cost of developing an additional brand, adding production capacity to get the product into the consumer’s hands, labor, and the marketing expense of advertising. Those costs may be justified if market research verifies the need to diversify and identifies consumer demand sufficient to warrant the effort. The hard decisions come when market research shows the demand doesn’t exist or diversification is not a viable option.
If a business owner has commissioned sales people, cutting back on those costs is often one of the first considerations, when it should be the last. Remember how revenue is generated: Sales! Look instead at more efficient production or distribution methods. Consider changing processes or procedures to trim waste and enhance margins. People should come before profits, and most business owners realize that – but without profits it’s hard to stay afloat.