Business mentoring is growing in popularity, just as business coaching did in the 90’s and 00’s. Even governments are getting on-board business mentoring with most states in Australia now offering free business mentoring with their local mentors.
A business mentor is someone who has owned businesses and often multiple businesses and seen them succeed.
Business ownership can be a lonely experience with no one to talk to who really understands you. An accountant is often filling the shoes of a business advisor however the conversations are often held once a year or every quarter whereas a mentor can be talking to you regularly, once a week or more often than that with emails communication.
Reason1 – Bounce Ideas Off
To have someone to bounce ideas off, to listen to your challenges and receive solutions and it can make all the difference in the world to not just your business but also to your state of mind and personal life.
There’s an infinite amount to learn about business. There are the initial decisions to make when first starting the business, such as what price to sell services at, how much to spend on a website and even choosing the name of the business. Making all these the
Reason2– Avoidance of Problems
We don’t know what we don’t know about business. Often businesses get into financial difficulty due to ignorance of a problem until it was too late.
Having someone who has been where you are and beyond that understands your business and what’s coming can avoid those expensive mistakes due to ignorance.
Businesses fail, not due to a lack of revenue, but due to a lack of cash in the bank, primarily caused by low net/operating profit margins. If a business with a revenue of $1,000,000 has costs and overheads of the same amount, the business won’t be profitable and therefore cash reserves will be non-existent.
The key to long term, sustainable growth is having the business operate with a healthy net/operating profit margin. When the profit margin is healthy, over 10% and ideally 15% or higher, then out of every sale there will be cash in the bank, after paying for costs and overheads.
Many business owners aren’t focused on increasing the net profit margin. They are focused on sales and getting the work done. Profit margins require a different way of thinking or mindset, one of efficiency, not productivity and this is where a business mentor can assist.
Most business mentors have a very good understanding of profit margins.
A profit margin is expressed as a percentage that shows the relationship between two numbers, revenue and profit. As revenue increases, profits do too, but not always in the same proportion. Often what happens in a business as it grows is that costs of sale can increase due to supplier increases or workers not being as efficient when employee numbers increase beyond 5 or 7 staff.
These increases in costs can lower the gross and net profit margin, causing cash flow crises.
Profitability is about increasing profit margins directly, irrespective if sales and income are increased. This is uncommon thinking and where an experienced business mentor can assist a business greatly. It’s not uncommon for a business to see a 20% to 200% plus increase in net profit, without any attention given to marketing strategies or lead generation.
That can seem impossible to the uneducated business owner, which is why a business mentor can be a valuable investment.
Reason4– It can be a Great Investment
A good business mentor can pay for themselves and still provide a high net profit return.
If a business with say $1,000,000 revenue has a net profit of $50,000 and let’s say a business mentor cost the business $20,000, then the revenue increase in the business necessary for the net profit to cover their costs would be $200,000.
That requires a BIG increase in leads to achieve that, provided there were no other expenses such as advertising that also added to the expenses in the business.
By focusing on the profit margins, which in this case is 5%, if the net profit margin increases from 5% to 7% then the net profit will have increased by $20,000 and this can often be achieved with a quality business mentor who focused on efficiencies and strategies to increase margins.
It’s actually just as easy to increase the profitability of a business as it is income for an experienced business mentor.
Reason5 – Increase in Confidence with Decisions
There are a lot of thoughts and decisions made by business owners with ‘hope’. Hope can be found with clients who owe the business money that it will be paid on time.
Hope is seen with hiring an employee that they will work out, be dependable, productive and consistent in their work.
Hope with a new marketing strategy, such as SEO or a new website that leads will come in and pay for the cost with extra sales and income.
Hope in regards to still being in operation in 5 years time.
Hope is very common with pricing that a sale will be achieved after providing it to a prospect and that the sale price results in a healthy gross/net profit when the sale or job is completed.
If you asked yourself how confident you were with all of these scenarios, what would you answers be?
Hope is a very common mindset experienced by business owners. Another mindset is certainty or confidence.
A business mentor can turn hope into confidence with all of the above scenarios and more.
Decades ago there was a common quote that said “Ignorance is bliss”. It’s not so common these today, probably because people – especially business owners – realised from experience that ignorance isn’t bliss, it’s extremely expensive.
When a business owner hopes a lot, they are often going to pay for it later when the results are seen.
A good question to ponder about business is, ‘what are the two biggest costs in running a business?’
Often the answers given are employees and marketing.
Another perspective is that hope and ignorance are the two biggest costs for a business.
Working with a business mentor can turn hope into confidence and even certainty. It’s often not understood how much hope the owner was using until hindsight kicks in after months of learning from their mentor. The owners are often surprised and shocked to think they had been able to keep their business running at all with all the ignorance they realise they had previously.
Imagine, if every decision you made in your business was with certainty. What difference would it make over months and years? That’s one of the 5 strong reasons to consider engaging an experienced business mentor.