Stop Playing the Blame Game and Create Success

You’ve probably heard the term “razor-thin margins” thrown around in our industry, especially when business doesn’t go as planned.

But here’s a truth bomb: There’s no such thing as razor-thin margins — there’s just bad math.

The Myth of Razor-Thin Margins

When buyers put pressure on pricing, our knee-jerk reaction is to assume our margins will suffer. But here’s the kicker: We often don’t know what our margins will be.

Imagine you have the chance to do a last-minute job. It looks like it might fit into your schedule, but you’re out of video projectors and looking at a hefty sub-rental fee. Your operations team is waving red flags, saying the gross profit will be too low to make it worthwhile.

That’s bad math.

Sure, your margins might take a hit because of the higher cost, but the rest of the gross profit is still good. This kind of thinking keeps us from being more profitable.

A single job won’t make or break your business. The overall picture — all the jobs you are or aren’t getting — is what affects your bottom line.

When your pipeline starts looking anemic and you don’t see enough confirmed business on the horizon, it’s natural to ask why. Here’s the answer: You’re not doing enough work in your selling sphere to create the demand you need to run your business.

Why We Fall into the Blame Trap

“But Tom, the economy is poor!”

“There’s too much competition!”

“It’s an election year!”

When we don’t generate the revenue we need, it’s easy to blame external factors. But the real reason you’re not generating the revenue you need is staring back at you in the mirror.

Blaming external factors doesn’t mean you’re avoiding responsibility. The fact is, you do feel responsible — and helpless. And when people feel helpless, they need to latch onto something.

So, you point to factors outside your immediate control — the economy, competition, the government, etc. But these damaging factors are also circumstances you’re aware of, and you have to use them in your strategy.

Strategy is engineering what you want to happen based on what you think will happen. For instance, if you think the economy is struggling, adjust your strategy for a poor economy. If a new competitor just entered your area, adjust your strategy for stiff competition.

Don’t blame external factors — respond to them.

The Balance Model: Your Path to Success

So, how do we break free from this cycle of blame and start creating success?

This is where the balance model comes in. In our sales example, where revenue doesn’t meet our needs, you end up with less gross profit and, consequently, less net profit. The revenue won’t cover the overhead plus the necessary profit you need to justify your business.

You’ve got two choices:

1. Lower your overhead to match the revenue you have.
2. Increase your investment in selling (marketing, business development, design, estimating, and sales) to boost overall revenue, generate more gross profit, and return to a favorable net profit situation.

Use the balance model to examine your entire company. If your overhead is too high, maybe your planning, execution, or admin team is too big. But it’s tough to cut into these areas — these are often process owners in roles vital to your business.

If that’s the case, you’ll need to figure out how to invest in selling more effectively.

Practical Steps to Create Success

Let’s talk about some concrete steps you can take to stop playing the blame game and start creating success:

1. Rethink Your Pricing

Often, the first step isn’t resizing your business. You can usually address some low-hanging fruit first.

If your company is balanced, you’re in tune with your financials, costs, and margins. Examining these forces you to rethink your pricing.

Here’s an example I used in my book, “Balance: How to Build a Scalable Business With Less Stress and More Profit”:

Many companies employ the false economy of having a lot of technical staff to reduce the expense of outsourcing freelancers. On an individual job basis, this makes sense. However, looking at your business’s entire macro over 12 months, you’ll often find that the added cost of year-round staffing reduces your net profit.

2. Adjust Your Labor Pricing

Simply changing the price of labor to reflect a reasonable gross profit — even if it means discounting equipment more readily — impacts profitability.

This small step helps move your current model closer to a balanced state.

3. Invest in Selling

Continue to invest in selling and manage overhead. However, a simple pricing change can have a phenomenal impact.

Shifting Your Perspective

I know what some of you are thinking: “But this time it’s different! The economy IS the problem,” or, “My industry IS more challenging than others.”

I hear you. Your circumstances may indeed present a genuine economic challenge. But the solution remains the same.

Identifying your problem doesn’t solve it. Knowing your industry is taking a nose dive doesn’t change the fact that you must do something about it.

Ask yourself: How long will this downturn last? If you know the answer, respond accordingly. If you don’t, pivot.

The balance model tells us that if our revenue will be reduced for a significant amount of time, we need to either reduce our overhead or invest in replacement revenue.

The Path Forward

We’re all human. It’s okay to have a pity party and to feel sorry for yourself. Spend some time on that, but don’t let it define your future state.

Yes, the economy dealt you a bad hand. Now, what will you do about it?

The balance model makes it easier for us to find viable solutions quickly so we can return to a profitable state as soon as possible. It’s time to stop playing the blame game and start creating your desired success, regardless of the current economic climate.

Remember, your success is in your hands. It’s not about the cards you’re dealt, but how you play them. Are you ready to stop blaming and start winning?