Why is my business busy but not making money?

You're working harder. So where is the money?

There's a particular kind of frustration that comes with running a busy business that never seems to get any richer. You've got customers. You've got work to do. The phone rings, the emails arrive, the team is busy and you barely have time to eat your lunch. From the outside, things might even look rather successful. And yet, when you look at the bank account, you wonder what all that effort was for.

The natural response is to try to sell more. Another customer, another contract, another job, another push on marketing. Sometimes that's exactly what the business needs. But sometimes it's the last thing it needs, because the problem isn't that too little work is coming in. It's what happens to that work, what it costs to deliver and when the money actually arrives.

Being busy is a measure of activity. Making money is the result of a system.

If your business is busy but not profitable, start by separating three things that are often spoken about as if they mean the same thing: sales, profit and cash. They don't. And once you see the difference, a lot of apparently mysterious business problems become rather easier to understand.

More sales can make a bad business worse.

Suppose you win ten extra jobs this month. Your turnover improves. But those jobs still need to be delivered, so someone must do the work, travel to customers, buy materials, answer questions, deal with changes and perhaps put right the odd mistake. If your team is already fully occupied, you might need overtime or subcontractors. At a certain point, you could even need another employee or another vehicle. The extra sales are real, but so are all the extra costs.

That's why the useful question isn't simply how much additional work you've won. It's how much additional profit that work is likely to produce, given the capacity you already have. A job that looks attractive on price alone can become a poor deal once the cost of delivering it is properly understood. Equally, a slightly quieter business with better-priced work and fewer mistakes might produce more profit, with a considerably happier team.

Where did the money get stuck?

Now we know what the numbers are doing. But the numbers alone don't tell us why. Perhaps jobs are taking longer than expected. Perhaps proposals are being discounted. Perhaps excellent work is completed and then sits waiting to be invoiced. Perhaps invoices are raised immediately but customers routinely pay late. The answers are probably already somewhere in the business, but they may be hiding in different teams, systems and conversations.

This is why I like looking at a business as a flow rather than a collection of departments. Start with the result you can see, then ask what had to happen immediately before it. If money hasn't arrived, look at payment, invoicing, completion and the sale. Keep travelling backwards until the evidence begins to explain what's happening. Resist the temptation to fall in love with the first explanation you find.

Five things to examine this week

You don't need to rebuild your entire business on Monday morning. Start with one service or job type, ideally one that takes up a lot of your team's time. Use real figures from completed work rather than estimated margins on an old price list. And if you discover you don't know the answer to something, that's useful information in its own right. It tells you what you need to start measuring.