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Business Coaching Question for the Day
October 16th, 07 1:51 pm | Posted by Andrea
There’s more to this question here than you think
If there were two businesses as follows:
- One that had a gross income of a million dollars, and a profit of $100,000
- And another that has a gross income of a quarter million dollars with a profit of $150,000
Which one would you want? (No this is not a trick question!)
For some of you this may feel like a no-brainer question. However you might be surprised how often this kind of situation comes up in individual coaching.
As a business owner yourself, post your comments below.
Also post your comments as a business coach. Is this a useful question? Why or why not? How would you coach a person in this situation?
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October 16th, 2007 at 3:52 pm
Looks like I am going to be the first coach to stick my neck out…
Option B all the way! you are right it may seem like the easy answer because, well it is more profit 10% vs 60%.
But I see it as less work as well and a more balanced life. To have a company that is grossing a million and has expenses of 900,000 is not leveraging themselves the best way they could no matter what the product or services is.
I am all about more time for fun!!
October 16th, 2007 at 9:26 pm
As with many questions that I use in my business coaching, my first response is: it depends.
Before I’d ask that question, I’d want to know what the client really wants. For example, are they employing 100 people with disabilities to make that 100K? Is that their vision? Or do they really want to be making more money for less work? (Amazingly, that is not always the most important factor in making business decisions.)
Thanks for making me think! Kind of like “pushups for coaching skills!”
October 17th, 2007 at 1:00 am
I would want to know more before committing to a solid answer, initially B seems like the obvious choice less income, more profit, but what are the opportunities there to grow profitability further, is it effortless or is the business owner doing too much themselves and although is more profitable right now is also time poor and perhaps struggling to grow and leverage further as a result.,
Whereas business B has been spending substantially more, and is driving more dollars in the door but is still returning a 10% profit, but i would want to explore the opportunities this spending is creating for the owner. Is it a business where the owner has delegated work that is not their strength or joy to have more time off, or to create and build relationships, or create products for future business. Cost cutting may not be the answer, they may be building a very solid foundation for future growth and long term profitabilty whereas business a may not.
Without exploring further and knowing more i find myself unable to make a decision as to which would be better, i am veering towards B as with more initial income their is more opportunity to grow or fix it and increse profitability in the future.
October 17th, 2007 at 6:42 am
Great question. Off the cuff I’d say Option B because you get much more juice for the squeeze. However it does truly depend on the other goals, values, and vision of the business owner. Does the scale of Option A allow them to do something they truly believe in? Is it a highly valuable product or service (to the collective at large) but has a low profit margin?
For my values and goals Option B it would be but as in all good coaching — awareness and illuminating the facts will help the business owner see “what is” and then determine if that is what he/she really wants.
October 17th, 2007 at 7:48 am
As a business owner, I would also opt for option “b”. The set-up of the descriptions of both businesses and the question, “Which one would you want?” makes me concerned about a business that has $900,000 worth of expenses!
As a coach, the metaphor that I see is one of balance. How can you leverage your downtime (i.e. profit) while managing your workload (i.e. expenses)? I would also ask “what is enough?” to the client. Defining that is essential.
October 17th, 2007 at 8:22 am
My response is also “it depends”.
It would depend on what all the expenses in Option 1 were, that reduces the net profit.
I’d also consider whether these expenses were worthwhile for me as the business owner.
For example, conferences and seminar costs can be viewed as an investment in oneself and one’s business. These expenses may reduce the net profit in the short term, but the long term returns may be greater.
– Sri
October 17th, 2007 at 1:36 pm
TWhy te second option of course - because then I’d be able to help others ie family and organisatations I support with the 60% profit and I’d also be able to follow my dream of creating trainings and authoring books with the time I’d have spare by not working longer to make $250K and only get 10% profit - which means less money to go round and less time to do what I want to do. It was an easy-peasy decision!
November 6th, 2007 at 10:39 am
Option ‘A’ all the Way! I don’t like to pay more income taxes or even give advise for ‘others’ to pay these additioanl higher taxes. With the second option you will get killed on your income taxes paying the HIGHER rate compared to a lower rate for option A. Your GOAL here should be to minimize your income taxes which is really the government’s money.
Joe Wasylyk
Seniorpreneur