When I ran a $150+ million business, I always felt like the guy in the circus that was spinning plates. Worse, I thought the solution to making the business more profitable was to do more and offer more to the market (i.e. add more plates). In the 18 years since I sold that business, I have worked with and counseled hundreds of business owners and the businesses they care about. Here is what I know for certain, we need a lot less plates!
We are drowning in processes, fads and Fast Company articles telling us the “one more thing” we need to do to make our business grow like we always wanted. We have our rocks, our “why” and our BHAG’s all organized on nice forms. As entrepreneurs, having too many areas of focus on is our enemy. Simplicity creates the control and results that we crave (Whether we realize it or not).
In the past few months I have been distilling what has always worked for those I work with. What specific actions and areas of focus have created the greatest results regardless of the type of business?
It turns out that they are two (not twenty two) areas that create, what I have come to believe, the outcome that will solve every other goal, dream, purpose and possibility for your business – PROFIT.
Here is the focused profit multiplier approach I use with my clients:
Steady Profit Growth:
The cost to reliably attract and sign the maximum new clients/customers in the shortest time
Continually optimizing the cost to retain and delight your clients/customers.
Give this a bit of thought before you dismiss it as too limited or something you already know/do.
I have yet to meet a smaller to medium size business that has nailed either of these two focus points as much as they could or should. The result is that their profits stay stagnant, decline or are FAR below their potential year after year after year. If running your business feels like a slog, I would want to know if profit is growing rapidly every year.
Let’s quickly look at each component (I plan to go into much more detail on every aspect of this approach in the coming weeks to make it practical and tactical for your business):
1. The cost to reliably attract and sign the maximum new clients/customers in the shortest time
The key word here is reliably. Do you have a rock solid repeatable process to connect with your prospects, make them an irresistible offer and have them sign on the dotted line (i.e. Pay you)?
Not sales people that are prospecting and hopefully will hit their quotas, I am talking about being totally dialed in on who your customers should be, a way to reach their eyes, ears, minds and hearts and turn them into a client. Not a new web site, logo or brochure. Not just random social media activity. A real start to finish system, based in the world we live in today (Not how it was done 10, 15 or 20 years ago), that you know will generate a steady flow of new business every month, quarter and year.
A full system, not just sales calls. A process and not merely activity. Scalable and not based on just setting higher goals. R E L I A B L E.
Is it as efficient as it can be so that the cost of gaining a new customer/client is always moving lower? Are you continually reducing the time it takes to sign a new customer/client? Side note: Do you know your current cost of acquiring a customer and how long it takes from start to finish?
This means you stop poo pooing (Yes, I said it.. and I even looked up the spelling) sales and marketing ideas that nobody has done in your industry or that seem foreign (or scary) to you. “That will never work in my industry” is a phrase you need to lose, forever. The goal here is to do what must be done until you know exactly how you will bring in X clients this month, quarter and year. To have total control over how that will happen.
Now think how knowing your new customer growth will shift how you enjoy your business. What it will do to your confidence as you start work each day. How it will change your life and those that fight alongside of you.
2. Continually optimizing the cost to retain and delight your clients/customers.
Here is the part that is far from sexy and requires some hard choices. This is where you must stop and understand your payroll at a deeper level along with every expense in the business. What percentage of it is focused on delivering your product and service above the expectations you set out in your sales process? What pieces do you have in place to create moments of delight so your clients will never leave and cannot help but refer you to others? Every expense not connected to this should be looked at for elimination. That includes employees.
Figuring out your people, your expenses and making them match ONLY what you need to retain and delight your clients/customers is a full time job. Few do it well.
Too many are stuck on org charts, titles and who reports to who (or is that whom?). Everyone in the company is either attracting and signing customers/clients or are in the business of retaining and delighting them. Period. I have yet to read an organizational chart that is structured around these two, and only these two, areas of focus. Is yours? You will find that every function of your business will fit nicely into this structure.
But, you say, profit does not matter for me. I am focused on growing revenue and the profit will follow. “Our goal is to be at $X million in revenue by 2025.” I used to believe the same. But I ran a business with a ton of revenue and very little profit based on this idea that one day scale will lead to higher profit margins. What I have found is, that day is elusive. All those one time expenses that stole profit this year turn out to be the type of expenses that somehow show up every year. Crises come up so you have to hire faster or for more money than you should. The drive for revenue growth without equal or greater focus on net profit creates bloat that is messy if not near impossible to correct.
Please, please do not tell me about Amazon and the decade(s) of losses they had in the sake of revenue growth. If you think your private business is anything like Amazon then this is clearly not the approach for you.
For the rest of you hung up on revenue as your key metric remember this:
Revenue is an ego metric.
Profit is a freedom metric.
I have learned, the hard way, profit is what will change the life that your business can provide to you and everyone else involved in it. Not revenue. I’ll take a $10 million dollar business earning $6 million in profit over a $50 million dollar business earning $2 million every time.
I hope you would as well.
Profit will fuel the freedom you crave (Even if you do not like to admit it in a world focused on businesses having to have a higher purpose). You will find that profit will allow your business to thrive and deliver on its mission and/or purpose. It will allow it to give back in any way that fulfills you. But wait, there’s more…. it will also pay the mortgage, your vacations, school for your kids, do great things for those you care about and fill your savings/rainy day/retirement account(s).
Take some time to consider how you would spend your time if you were only focused on perfecting this formula in your business. The creativity and fun you could bring to it all. Yes, you would be focused on less but there is so much to do within this more narrow approach.