When Milton Friedman wrote his famous article it stirred a great deal of controversy. Many people believe that profit making is an evil undertaking, while having a high level of social responsibility is more honorable. Friedman’s point was that business profit and social responsibility are one in the same. The text of his original article about increasing business profits is a must read.
However, that’s not the main points I’d like to make now. Instead, I’m going to continue under the premise that you, the reader, are in favor of increased business profits regardless of your view on social responsibility.
Key reasons why many businesses don’t increase business profits.
It’s easy to see how considerable amounts of waste, lack of cost controls, poor investment decisions; and, overall lack of concentration on the day-to-day execution lead to poor results.
Far too many businesses, frankly, operate in a very casual almost “seat-of-the-pants” style.
This approach, while it may work well in boom times, typically leads to very low profits, a lot of red ink, and going out of business.
It is just that a robust economy masks most of the mistakes business owners and managers typically make.
The key techniques of increasing business profits.
- Adopt a mindset like an owner. The objective is to believe yourself to be totally responsible for the results. This means single-mindedly doing whatever it takes to produce results in a continuous ongoing basis. Having the proper “owners mindset” is essential in that undertaking. Incidentally, if you are a manager and not the owner, the same technique applies to you—adopt the mindset of an owner.
- Create a high-quality strategic and tactical business plan. We are not talking about a plan one would use for financing purposes. Instead I am referring to the type of plan which is very clear about what and how the business will go about their activities. Many times this involves a simple rewrite, but most frequently it’s a “start from scratch” approach.
- Offering a terrific product or service. Far too many business owners produce products and services that they like and not what their customers like. It’s very critical that you focus on the word “like” or “want” and not the word “need”. People buy what they want not what they need. You can waste a lot of time and energy designing and creating products that are too comprehensive or services too detailed and time consuming.
- Top-notch management. Of course, you need great people top to bottom, but the most vital of all of those people is the management team. Your managers need to know the “how to” of real day to day management and not the theory taught in the majority of business schools. Remember, you have to manage actuality not conceptually.
- A terrific marketing plan. Your marketing plan needs to focus totally on what customers want. This begins with a high level of research and analysis to determine exactly what this means. Frankly, this needs be extremely comprehensive and detailed. Often, and frequently best, is to simply survey your customers and prospects and ask them what they want. Once that determination is made, the marketing plan needs to spell out how it’s going to attract new customers and retain current ones by focusing on what they tell you they want.
- A repeatable selling process. Sales is not an art form. Instead, it is a series of repeatable activities. No highly successful business relies on individual sales representatives doing whatever they feel is necessary at the time. These successful enterprises employ a step-by-step pipeline oriented sales approach. The term “by the numbers” is especially appropriate here.
- Exceptional customer service. The exceptionalism we’re discussing here means that everyone in the business has to be “customer facing”. The emphasis needs to be on ensuring the existing customers are so stunningly pleased with what they’re getting they become fanatical about the business. When they get to that level, referrals tend to flood in.
Here’s the exact steps to take right now:
First, evaluate your business on how well it is doing in each of the seven steps you have just learned. A 1 to 10 scale will work just fine for this process.
Second, start with your weakest area and create the steps necessary to raise it to at least a 7.5.
Third, determine what to do on all of your weak spots and bring all your scores into the 7.5 to 10 level as soon as possible.
You will quickly find your business among the most elite in your niche when you do.