|
4 Timeless Business Lessons To Improve Your Company’s Future Profitability, Learned From Studying Successes and Failures of The Past |
Now is the best time to analyze past successes and failures and apply what you find to drive profitability. |
Illustration: Getty Images
Brooke Lively, an Entrepreneurs’ Organization (EO) member in Fort Worth, is founder and president of Cathedral Capital, which provides strategic financial advice to drive profit by creating customized teams of financial professionals to analyze data trends and guide entrepreneurs through their numbers so they can predictably scale and grow their businesses. We asked Brooke how her company marks the transition into the new year. Here’s what she shared.
Take the time to dissect the projects, initiatives, and general successes we experienced over the course of the previous year to find the root causes so we can apply them to what we are doing in the coming year. We do this because we know that certain practices drive profit–it doesn’t just happen by accident.
Here are four lessons we learned that have significantly contributed to the profit of our company and to the hundreds of companies we have worked with over the past 10 years:
This is a concept Jim Collins writes about in Great By Choice. It’s about discipline and consistency. We found that when we start a project, we perform best when we do a set amount each day. Every time we hurry and try to rush something to market, we find that the result is less than stellar, that we have to redesign it, and that ultimately, it ends up not being profitable. This is not a race to see who can finish fastest; it’s a long journey. So, we need to conserve our strength and march a consistent 20 miles per day.
Our Integrator brought this practice to us. When we start a new project, we not only define success, we define failure and the point at which we will discontinue the project. In writing. In advance. What did Kenny Rogers say? “You’ve got to know when to hold ’em, Know when to fold ’em.” Knowing when to fold is hard, especially when you are in the middle of it and thinking, “If I just had one more (week, month, employee, developer, acre).” Setting a circuit breaker at the beginning when you aren’t emotionally invested keeps you from digging a hole from which you can’t emerge.
As fractional CFOs, the biggest lesson we have learned is that banks only want to give you money when you don’t need it. As a result, you should always be looking to increase your loan capacity. Especially when you don’t need it. And double especially if you just had a good year. And while I know that people are telling you to hold off getting loans right now because rates are high, I promise that bank rates are lower than the rates on your credit cards–which will be the only place you can find credit when you need it during a cash crunch. Having available credit lines to tap in the middle of a big project can mean the difference between success and failure, profit and loss–of both that project and your company.
In our company, we don’t believe in budgets, but we do believe in Profit Plans. Functionally, they are the same thing, but Profit Plans designate how much you are going to spend in the coming year to generate the profit you want to create. It is a much more fun (and profitable) way of looking at things than the very restrictive and often break-even approach of a budget. In this environment of uncertainty with rates, hiring, inflation, and everything else happening in the world, planning is more important than ever. Being able to look at what you thought was going to happen, what did happen, and then being able to adjust expectations and either get back on track or adjust the Profit Plan to ensure continued success (read: profitability) is key to survival. So during this “quiet week,” look back at your successes and failures. What caused your successes, and what caused your failures? Now look at your plans for 2023. What adjustments do you need to make to ensure profitable success?
And always understand your customer’s experience.
Seems like common sense, but so many times we get wrapped up in what our team members are saying about the customer that we neglect to ask our customer directly, or better yet monitor the customer’s experience on a regular basis. Many of our clients take it one step further to gain insight on the competitors customer experience. Let us help you gain that insight through a mystery shopping program, competitive mystery shops and customer surveys that actually drive traffic back to your business. We anxiously await your call. BY ENTREPRENEURS’ ORGANIZATION and CARL PHILLIPS
|
|
|
Business Evaluation Services, PO Box 507, Arroyo Grande, CA 93421, 888-300-8292 |