5 Critical Factors to Multiply Profits
November 29th, 2017 // 1:25 pm @ Scott Manning
I often wonder why business owners have such small thinking. In numbers, in ideas, in vision, in work ethic. But then, I remember, I was there once too. I, like all people, only knew what I knew based on experiences and awareness of what others had done.
There isn’t a day that goes by that I don’t have a client who says to me that they never really thought what they are achieving was even possible… so profitable, so much fun, so rewarding. They realize now just how low their expectations were.
And there in lies the biggest problem of them all – to reap more rewards and to develop a business that can make it possible – you have to have greater expectations.
In most every case, your business is designed to deliver to you exactly what you are getting right now. It’s not that complicated really. It might be happening on accident or you might have some level of predictability to your monthly results.
Either way, you will only earn and create the revenue that your business, structure, systems, people, pricing, marketing and sales are set up to provide. This is why I work so hard and talk so much about reverse engineering because that is the only way to really know what to expect – math doesn’t lie. At the end of the day, every business breaks down to a math problem.
It takes more than math to run a business, to extract money, to attract customers, to deliver goods and services, and to build the machine; but when you strip all of that away, you can see with basic math what your business is set up to do.
If you can’t make it work on a piece of paper, you don’t even stand a chance in reality.
Once you have your formula then you develop the business into that formula and you achieve predictable results.
That is why I push my doctors to think bigger, want more, stretch themselves on the key areas of growth so that we can turn little numbers into bigger numbers, we can turn addition into multiplication, we can turn slow and gradual into accelerated and compounding.
Here is the biggest and silliest example that I always get… People ask for ‘more customers’ (whether that’s your own clients or patients or whatever it is), in order to grow your sales…
First, we look at this very simply and figure out how much your customers are worth to you right now.
Therefore, if we go get more of these then we know what the result will be because we already are living out the example now.
Then we say okay how fast can you deliver on these new customers… in other words, do you have capacity to bring them in the way things are right now.
If you are crammed full in your business, then it’s better to figure out how to make everyone inside right now worth more to you or to get rid of low value people and make room for more valuable people – than it is to just go dumping more people on top because you will quickly diminish your profitability.
The other big challenge is if you are not properly converting the customers you are getting now (or they are not worth very much anyways), why would we want to multiply a small number? Why would we want to fill up capacity with more of the same?
You have to look deeper than just the simplest answer of ‘more customers’ to grow your business.
You really want to be looking at five critical factors that will directly impact your ability to grow and be more profitable (which is ultimately the point)…
1 – The value of your customers, how much they are worth not just in terms of revenue but actual profit
2 – How fast you can turn over the delivery to your customers so we can ‘earn’ the dollars more efficiently and be more profitable through scale
3 – Is there a way to turn a customer into multiple streams of income versus just one or more than just what they came in for originally
4 – Can we reduce the overall cost of delivery or find some other way to increase the profitability of the customer, raising fees is the best way but there maybe inefficiencies or scales that can be reached at a certain threshold
5 – Where is the big slack adjuster in profit and how can we find an acceleration breakthrough or opportunity for growth that we aren’t thinking of
Now, each of these is distinctly different but tie together in the math formula of the business. The point being: there are other ways to grow besides just doing more of the same and adding on volume. It must be done strategically and profitably; which means you have to look at the reality of the path and profit of each customer as it is now. Running people through the same thing you are doing will get you the same results and at some point, you will hit a wall with capacity problems.
We’ll talk more about this next week and how to make ‘real’ significant and profitable changes to your business so you can grow bigger and faster in the coming new year.
Category : Blog
