You can’t make your business profit more sustainable overnight. It takes time and planning to get it right. But if you’re thinking of selling your company at some point in the future, then building up a sustainable profit should be a key part of your exit strategy.
An initial approach to this is should be to training clients address any inertia in your business. But what is inertia? And what can you do about it?
Inertia is resistance to change, or the tendency to leave something as it is because changing it requires exertion. We’re all guilty of suffering from inertia in our everyday lives. A classic example of this is joining a gym. “This is it”, we say “time to get fit”. Yet a few weeks or months down the line, it all seems like too much effort. Before you realise it, you’re paying out a monthly fee for a facility that you’ve stopped using.
And then months go past, and you don’t get round to cancelling your membership. The money continues to be taken from your account. This is what I call ‘high inertia’ – unless you act to stop it, it will continue to happen.
Another example of high inertia is how we use our bank accounts and credit cards. In their Private Business Barometer, PricewaterhouseCoopers (PwC) recently found that only six per cent of respondents had changed their business banking relationships in the past six months. This is despite the fact that new deals are coming on to the market all the time, allowing businesses to save money.
Your inertia assessment
Inertia applies to your business through the types of sales contracts that your company has in place. At one extreme, you may provide contracts and memberships that are automatically billed each month, quarter or year and will continue to be paid until they’re stopped.
At the other end of the scale are one-off projects. These are planned, take time to bid for and have a definitive start, middle and end. Once a project has been completed, you need to replace it or your revenue will fall. These low inertia projects keep you on a constant sales treadmill, which can feel like you’re running just to stand still.