Never Chase a Profit

Increase your company’s profit by 10%. Improve your department’s profit by 20%. Increase your contribution margin by 30%.

There is nothing you can do to make that happen. It’s impossible. There is no way that you or anyone else can move a profit line. Period.

If your goal in your business life is to drive profits, you will never succeed by trying to move profits up. It cannot be done. You cannot physically move a number. You cannot physically add dollars to a profit figure. That’s not how it works.

Instead, on the top line, you have to know which actions that you take which cause your customers to spend more. On the bottom line, you have to know what actions to take that can reduce your expenditures. It’s a focus on the actions that drives profit, not a focus on the dollars.

The top line focus is the customer. Why do they buy? Why do they spend more? Why do they tell others good things about you? Why do they stay? The answers to these questions lead you to actions that help you grow the top line. You need to ask customers these questions. You need to act on the answers.

The bottom line focus? You may think it’s internal operations, but I disagree. The bottom line focus is the cost of acquiring that dollar from the customer. What does it take to get a dollar from a customer? How can you spend less to get the dollar? What are you doing that in no way attracts a dollar from that customer? The answers to these questions will help you determine how to reduce expenditures.

To increase your margins, focus on the customer. Never chase a profit.

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Posted on in Business Advice

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