Each day business owners tackle the need to continuously improve business performance. Should the company improve and innovate existing products and services? Enhance customer service? Get smarter with business development? What will help us meet our revenue goals?
The problem is that the answers may keep everyone busy, but not actually improve business performance. Owners and management need to ask a different question every day: “What can we do to increase the company’s cash?”
Cash is fuel for growth. Growth requires spending money: on skill-builidng, products and service development; service, service and more service; quality and high value; cultivating and nurturing buyers; robust business development; marketing, marketing and more marketing. Cash makes vertical and horizontal expansion possible.
Do You Use These Tactics that Decrease Profits?
Where does all this cash come from? Profits. Every sale must generate a profit, not by accident but deliberately.
This seems like Business 101, right? Who doesn’t require a profit on every sale? It turns out that many companies do their best to decrease profits. Do you recognize these?
• Groupon and the like. “We’ll get lots of new buyers, even if we lose money on these deals, and they’ll become regular, profitable, customers.
• Constant sales, whether for products or services.
• Free consultations.
• Referral fees.
• New client/customer discounts.
• Loss leaders that don’t lead to anything.
• Competition-driven pricing.
• Competing to provide low-price, technically acceptable services.
Every one of these tactics reduces profits or even causes losses. These are not the ways to improve business performance.
Increase Profits Instead
We work with privately held companies to make this question “What can we do to increase the company’s cash?” the start of every conversation. If you are not making a profit on every single sale, you are short-changing your company, your clients and customers and your owner wealth.
Start every day with the goal to improve business performance and by asking “What can we do to increase the company’s cash?” If you need help seeing how to do this, let us know. Sometimes it’s a pretty straightforward change in perspective that makes a huge impact on cash.