The 3 Elements of the Unified Theory of Profitability (Infographic)
Entrepreneur's New Year’s Guide
Finding ways to accelerate growth and maximize profitability are getting harder and harder. When trying to increase revenues, companies tend to hire more sales people. To increase profitability, they increase prices or decrease costs. But what if there were other ways to do this?
The visual below shows how our mindsets need to change about growing revenue and increasing profit.
It's not longer sufficient to just cut costs, or add people or raise prices. The world is too fast-paced for that. Companies need to leverage everything they have.
As I write my new book, The Unified Theory of Profitability, I am reflecting on a lot of my client work to be able to share what has been most successful. There are three things that the most successful small and medium-sized businesses do to grow their top and bottom lines without making any new financial investments.
1. They focus on one priority.
That one priority is growth. You want to leave a strong legacy? Focus on growth. You want to make more money? Focus on growth. You want to become the leader in your industry? Focus on growth. Everything else is noise.
I recently worked with a client that had multiple priorities they wanted to work on. These priorities focused, both directly and indirectly, on becoming a market leader. How did they end up becoming a market leader? They focused on growth. Once you have identified your one priority, every decision you make is focused on helping you make progress. It cuts out the noise and the wasted effort. Every decision they made focused on growing their business into specific markets.
Related: 8 Steps to Keep Your Company Growing
2. They turn cost centers into profit centers.
What is the point of a cost center? What is the point of having a department or division of your company that is not contributing to increasing your bottom line? Look at your cost centers and figure out how they can add value.
Take customer service. Many of your companies have a customer-service function to deal with customer issues and complaints. Do those customer-service functions make you any money? They should. How many other people in your company are dealing with paying customers all day long? And the customers are calling you! Sounds like a good opportunity to sell more to your customers. Teach your customer-service people about all of the products and services you offer. Teach them how to resolve a customer issue quickly and effectively and also how to identify customer needs. Then let them sell.
3. They turn away customers.
I had a client who generated $1 million in new prospective sales in just 90 days by turning away customers. That's because they turned away the wrong customers. They focused on those customers and prospective customers who would most benefit from what they offered. They didn't take every piece of business that came along. They targeted their ideal prospective customers and implemented strategies to acquire them. This ensured that their resources were focused on the opportunities that could most benefit the company in the long- and short-term. Do you know who your ideal customers are?
You need to become an expert in your company's operations. Leverage everything that you can out of it. Get the most out of your people and your assets -- your people are part of your assets. Get rid of the old way of thinking about sunk costs, compliance departments and cost centers. Think about innovation, acquisition, retention and acceleration.
That way, you can achieve constant growth. You can maximize profitability. You can create a sustainable organization and a wonderful legacy. Isn't that what we all want?