This newsletter will focus on providing insights on how to increase profit margins and performance without making any new capital investment. I call this finding your True Profit.
I hope you enjoyed the first edition of my newest creation, Margin Call. Since I am always looking for new ideas and topics to cover, please don't hesitate to contact me with topics and themes you would like to read more about.
The Three Key Factors of Operational Excellence
It's always easier to think of things in threes. In order for your organization to achieve operational excellence, it needs to master three key factors:
Innovation - the process of developing, applying, and maximizing the impact of new ideas.
Performance - the ability to maximize results through people and process.
True profit - the ability to maximize financial performance.
The visual below shows how these factors intersect.
When you have innovation and performance, but you are not maximizing financial results, you are leaving money on the table (area 1).
When you have innovation and true profit, but are not maximizing performance, you are hanging on by a thread because those performance deficiencies will eventually catch up to you (area 2).
When you have true profit and performance, but you are not innovating, you are dying a slow death because your competition will surpass you (area 3).
It's only when you have the convergence of all three factors that you can achieve operational excellence and maximize your results (area 4).
Which areas can you improve on to maximize results and achieve operational excellence?
Accelerating an Increase in Profitability
There are four ways that you can increase profitability:
You can sell existing products and services to past customers.
You can sell existing products and services to new customers.
You can sell new products and services to past customers.
You can sell new products and services to new customers.
The fastest way to accelerate an increase in profitability is to focus on #2 and #3.
When selling existing products and services to new customers, you are able to leverage past customers for referrals, testimonials, and evangelism. It becomes easier for new customers to buy from you because others have purchased these same products and services from you before.
When selling new products and services to past customers, you are able to leverage the relationships you have with those customers. They have purchased from you before and know the quality of your offerings.
#1 and #4 are more difficult to achieve, don't provide the same opportunity for profitable growth, and will take longer to achieve. If you want to increase profits quickly, focus your sales strategies on #2 and #3.
Do you need to adjust your strategy in order to accelerate your profit increases?