Our focus today is engineering profit and cash for you the business owner. We’ve been lucky enough to work with hundreds of businesses and what we see is that most business owners are primarily focused on growing sales revenue, which is fantastic but it’s limited.
A better goal is to grow profit, and an even a better goal, again, is to grow more cash in your business. What we have seen is what you focus on is what you get. Check out this 2 minute quick video below.
With most businesses that we see, they focus on growing more sales and revenue, but what happens at the same time is that expenses and cost of goods sold (COGS) go up with it. See in the diagram below how profit remains consistent even though sales revenue is going up. So you don’t necessarily drive more profit in the middle.
Talking about this ‘Running the Business End of the Business’ is not very attractive to a lot of business owners and marketers who just want to focus on the next bright shiny object, but what we are talking about here today is very important as we are now going to look at you can engineer your business to be more profitable and ultimately produce more cash for you.
What we see that can make a massive, massive difference for a lot of businesses that we work with is that if you focus on reducing costs and reducing costs of goods sold, and at the same time focusing on growing the top line of sales and revenue, you can create what we call the profit wedge.
You can imagine this bit in the middle is profit. See how its getting bigger month by month. You might get to the point where you can’t reduce your costs or your cost of goods sold any more.
You might flat line your expenses and can’t reduce it anymore – that’s fine, its calls Zero Overhead Growth (ZOGS) and if you’re still able to grow the top line of revenue and sales, then you can still be more and more profitable over time.
The important thing here is we are not just ‘hoping and praying’ that your business is profitable. If you want your business to have more profit and cash you need to focus on this area and engineer your own Profit Wedge. This could easily be one of the most important things you learn in your business journey.
One way that we have found in our business of ensuring that we create a profit wedge is by having one team (or key team member) focused on growing revenue and another team (or key team member) focused on reducing expenses. Try this in your business for a few months and you will be surprised at how much more profit and cash you are able to generate.
Give it some thought – How can you implement the profit wedge in your business? How will you achieve focusing on reducing costs and reducing costs of goods sold at the same time as growing your sales revenue?
I hope this is useful for you. I know we got a lot out of it when we first learned it. I firmly believe that this profit wedge concept can have a positive effect on many businesses. It would be great to hear your thoughts or experiences on this subject. Pls share below if you would like to hear more of this type of ‘business end of the business’ stuff of if you just want ‘digital marketing’ from me and my team. Cheers Greg.