Growing a business beyond its plateau point to true sustainability requires a significant and intentional shift in the owner’s perspective.
The day to day for an active business owner can be filled with worry. Whether the business is setting new high-water marks or struggling to stay afloat, one thing is certain. Your management team and front-line employees expect your guiding hand to navigate the business through its challenges. Every growing business must traverse rough water, but if you are constantly navigating through storms your focus is on the wrong place. If long-term success is your goal this course correction will put it squarely in your sights. Stop spending so much time and energy worrying about profit.
Profitability vs. Profit
Here’s what I’m not saying; “Managing profit isn’t important”. If that were true, you’d pass by Blockbuster Video stores and new Deloreans on every other corner on your way to work. As a business owner, there is something infinitely more crucial to focus on; Profitability. How is Profitability different than profit?! Doesn’t managing profit lead to profitability? The difference between business owners managing Profitability vs. profit is what sets some business squarely on the path of growth and others on road of decline; too often, needlessly so.
Profitability is your business odds of success now and into the future. This is where an owner’s insights must be focused. This isn’t an approach based solely in textbook theory, rather is has real world implications that will shape your actions and your team’s success every single day.
Here’s an example: One of your managers comes to you to discuss an issue that will reduce the profit earned one of the current jobs. What do you do?
A profit-minded business owner would help their manager develop strategies to recoup the reduced earnings on this job. They may even advise them on how to best execute the strategies. – If long-term success is your goal, this simply isn’t good enough.
A Profitability-minded business owner in the same scenario would first ask themselves “Where in our process did we fall short? How can we improve it to ensure we get the desired result?”. As you support you manager’s needs in their current challenge, your primary focus is improving the odds of success for the next thousand occurrences. You should come away from current issue with clear and time-bound action items for bolstering your process to yield an improved, repeatable result.
Here’s another one: You are the head coach of a baseball team during tryouts with one spot on the roster left to decide. The two players up for the position are identical in every way except one. They had identical times reaching first base after a hit, but while one had perfect form as they ran the other surely would injure themselves mid-way through the season with how wildly terrible their running form was. Whom do you choose?
The profit-minded choice is the player with the great form that will last the season without injury. This is a focus on near-term success, but this approach is what drives a culture of constant firefighting.
The Profitability-minded choice is the player with the poor form who is injury prone. Why? Once your base-running coach properly trains the terrible form player to use correct running form, they will be several steps faster than their competition. After all they performed identically without the added efficiency benefits of perfect form. As you direct your staff to focus on improving the repeatable result with that player, your odd of winning in the future increases in a sustained way.
With the business owner focused on profitability someone must actively manage profit. But who? The simple answer in our examples if you look closely. Managers must manage profit while seeking support from the business owner at clear escalation points. Don’t be fooled; the answer is simple not easy. Here’s the difference – Weight loss is simple; extremely so. It is merely caloric intake vs. caloric expenditure. It’s just two numbers – balancing a checkbook is more complex. But anyone who claims weight loss is easy is selling something.
These are a small sampling of what a business owner must accomplish to ensure long-term success; to ensure profitability. They must do all this and more to protect the business’s future while continuing to run the day to day. You see? Simple not easy.
The Ultimate Question
Is it worth it? That depends on what you want out of your business. If you’re content with a business that runs you rather than you are running the business, then treading water with a profit-minded approach may be all that is possible. But if you are business owner who is passionate about building something you can pass on to those you care about, then the effort will pay dividends. Too often we let the urgent crowd out the important. What’s important to you?
Leo Banjo adds his depth and breadth of expertise in lasting culture change, operational excellence, and project execution to the wealth of talent at Cogent Analytics. As an alumnus of The Citadel in Charleston, SC he has led organizations to recognize & surpass their self-imposed limitations for over 15 years. His change management expertise through enriching the capability of management teams to resolve conflict, define objectives, and realize goals serves to build up everyone he partners with. His consistent success in dozens of unique industries in over 10 different countries provides a comprehensive perspective.