When I was starting out in business as a P&L manager for a Fortune 50 company, a wise mentor gave me advice that’s worth repeating. It was “there are only three good times to focus on profitability – when you’re growing, when you’re plateaued, and when you crater”. The best wisdom is often painfully obvious, isn’t it? Which stage are you at today?
Tricks of the Trade for Your Profit Stage
- If you’re growing… its no secret that you need cash to invest for growth, plus a strong income statement and balance sheet if you plan to seek financing. Your CFO is likely working hard to optimize profits… but profit is about behaviors, not bookkeeping, and their role by definition has little impact on day-to-day employee and customer behaviors at every stage of the value chain where profit is created or destroyed. It’s not that your CFO is not doing his/her job… it’s just that there’s a different job to be done.
- If you’ve plateaued… you’ll stay stuck unless you’re able to find new customers, new markets, new ways to be more efficient and effective. Your continuous improvement team is already working hard to drive costs out and optimize profits. They’re going deep within your operations to drive out waste, but their efforts are only impacting 30% of your value chain and only 1 of the 5 categories of subtle, hidden costs that destroy profitability. There’s a broader job to be done.
- If you’re cratering… there’s a lot of economic and trade uncertainty today, and you may have found yourself squeezed in the vice of falling sales, rising costs, and pressure on margins. You employees are doing their best to get things back on track, but I want you to imagine this. What if you left a Rubik’s cube on your boardroom table and asked everyone of your employees to give it a couple of twists each day on their way by. What are the chances you’d solve the puzzle? It’s the same with profitability. You need a systematic approach, not well-intentioned but random, crisis-driven efforts.
I’ve led organizations to higher profits through all 3 stages. Dig a little deeper with this full article from the Association for Manufacturing Excellence, The Only Three Times Manufacturers Should Care About Profit, and reach out to me if you’d like to explore how ProfitU can help you take a deeper, broader, more systematic approach to earning the profits you know you could and should.