A great business model isn’t just about profitability. It’s about sustainability. If you have to work 80+ hours a week just to maintain or grow your company, you’ll quickly find yourself burnt out.
Sure, it may be necessary to pour your days and nights into a business when you’re just getting it off the ground or during a challenging period, but that’s not a long-term solution.
Change can help you break the cycle.
But how do you know if you need to change your business model?
Ask yourself these questions:
Are You Generating Enough Operational Cash Flow?
Operational cash flow is the lifeblood of your business. It’s the cash you generate through your normal operations.
By monitoring strategic cash flow KPIs, you can determine whether your business has the cash to:
- Maintain operations
- Expand
- Grow
- Fund the lifestyle you desire
How can you determine whether you have sufficient operational cash flow? Assess your:
- Break-even point
- Gross margin
- Variable costs
- Fixed overhead costs
If sales are barely covering your expenses, then it may be time for a change. Yes, financing can be a temporary solution, but it’s not sustainable over the long term.
We once worked with an engineering firm that was struggling with its cash flow. When we took a closer look at their operations, we realized that their business model was flawed. They could only cover their overhead consistently if:
- Their team was 90% billable
- They were able to bill all of that billable time
- They collected it in 30 days
It was unsustainable to work at that threshold. Vacations, holidays, and PTO made 90% virtually impossible. Then, they also had cost overruns that they couldn’t bill. Collections commonly took 90+ days, and they had bad debt write-offs every year.
This scenario is a classic example of a business that needs a different model.
If your goal is to expand operations in the coming years, then you also need to consider whether you have limited space or staffing capacity. And you need to be able to confidently cover your higher overhead.
Your core business must generate enough cash flow to cover expenses and allow you to grow.
Are You Getting a Good Return on Your Investment?
When choosing a model for your business, you probably overlooked one important thing: the return on your investment.
What we mean by investment is your:
- Time
- Energy
- Money
Let’s say that you’re dedicating 60+ hours a week to your business (which, unfortunately, is not uncommon for owners). Are you being well-compensated for that time?
Your answer to this question can help put things into perspective.
And how about the money you have tied up in your business?
Think about it this way: If you put those same funds into the stock market, you would expect to get a 5-10% return. Why shouldn’t you expect the same return from your business?
Let’s say that you invest $100,000 to start your business, and then put another $50,000 years later during a rough patch, and then put in another $200,000 to expand. Are you getting a good return on your $350,000 investment?
Of course, investment isn’t just about dollars. What about the energy you put into your business? Are you being well-compensated for that?
Far too often, entrepreneurs put a lot of time, energy, and money into their business but only take a minimal amount out. They justify it through the belief that they’re growing their business, but are they really? An informal valuation can give you a clearer perspective and help you determine whether you’re truly being compensated enough for your investment.
What Does Your Work/Life Balance Look Like?
Take an honest look at your current work/life balance. Are you constantly stressed? Are you worried about work when you should be spending time with your family?
If the answer is yes, then something needs to change.
Stress will burn you out, and it will burn out your employees, too.
If your goal is to build a healthy work environment, then this needs to start from the top down. Focus on improving work/life balance for both yourself and your team. Research shows that offering balance reduces employee turnover, so not only will you have a happier team, but one that sticks around.
One of the biggest hurdles owners will face in this area is understanding what balance actually means.
You’re passionate about what you’re building. You put a lot of blood, sweat, and tears into your business. The line between work and your personal life can easily get blurred.
How do you separate the two?
Ask yourself one important question:
Are you actually enjoying life outside of work?
Are you on the phone handling work tasks when you’re out to dinner with family? Are you struggling to be fully present because you’re constantly thinking about work?
These are signs that you need a change.
And the changes that you implement could have a positive effect on both your life and the lives of your employees.
For example, if you’re not enjoying life outside of work, it may be time to:
- Hire more employees
- Adopt new technology to streamline tasks
- Delegate more tasks to your team
Expanding your team and implementing new technology will free up your time and help make workloads more balanced for your employees.
That additional free time will give you the chance to:
- Pick up new hobbies
- Spend more quality time with your loved ones
- Enjoy the fruits of your labor
- Maintain a healthier, more active lifestyle
When you give yourself permission to have a good work/life balance, you’ll find it’s much easier to be creative and stay focused.
Final Thoughts
Ultimately, a successful business model isn’t just about profitability. It’s about sustainability and ensuring your lifestyle aligns with your personal well-being.
If your current approach sacrifices your quality of life and requires relentless work, it’s time for a reassessment.
Start with your operational cash flow. Is it enough to maintain and grow your business without relying on unsustainable financing? Next, evaluate whether your time, energy, and money investments are yielding a worthwhile return. Consider a business valuation to measure progress. Finally, prioritize work/life balance through delegation and automation to free up time for personal fulfillment.
By adjusting your business model in these ways, you can achieve both professional success and the lifestyle you envisioned when you started your journey.
Looking for help with this process? Click here to learn how we can get started today!