The profit picture goes beyond sales less costs
By Leanne Hoagland-Smith March 15, 2013 3:22PM
Leanne Hoagland-Smith. | Provided photo~Sun-Times Media
The traditional business growth model of “sales-less-costs-equal-profits” is simple and may be the reason so many businesses fail in the first year. There are many elements to profit. It’s more of a design, a picture puzzle with just more than the two pieces of sales and costs.
Some of the other pieces of the profit picture include:
• Exchange of value between different revenue groups
• Organizational structure
• Research and development
These are not all the pieces to the profit picture; however they are a good start.
When employees know how the company makes and keeps money, they are more inclined to be profit driven. This is the desired high-performance culture of any organization where all employees are:
• Customer driven
• Results driven
• Quality driven
• High business ethics driven
• Profit driven
Yet how many employees truly understand the difference between gross profit and net profit?
How many employees know the gross profit and net profit margins for each solution (product or service?)
How many employees become the profit keepers or watchdogs for the enterprise?
How many employees become the profit innovators who continually seek to modify existing solutions to meet future customers’ needs?
For many small business owners to C Suite executives, their approach to the profit picture is top down created and not bottom up. Just imagine all the lost opportunities by these individuals because they have embraced this traditional business growth strategy?
When employees have a unwavering mindset to be relentless in their pursuit of how to make and keep money, then the organization truly demonstrates a culture of high performance and one of sustainability. This mindset starts at the top and does require letting go of many of the currently accepted best practices and that first step is probably the most difficult for those same small business owners and C Suite Executives.
Next week’s column will examine the critical growth goal categories respective to profits.
P.S. Shout Out – Gino’s and Kelsey’s steak houses provide quality steaks to seafood.