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Where is My Profit?

Taylah Wallace – Monday, January 09, 2017

Perhaps the ultimate business dragon and one most people readily identify with is simply a lack of profit. However, while it is simple to identify it is far more complex to address.

When asked what their major business goals are many small business operators will say that their major goal is to make a profit.  While this is obvious the problem with this thinking is that the goal is an outcome that requires a number of objectives to be achieved.  Imagine if your football team’s coach communicated to his team that the major goal for the upcoming season was to win the premiership.  While this may please the team they will soon lose direction and focus as the season unfolds as the goal is distant and not readily part of their everyday training and playing.  A number of factors bear a major impact on the ultimate goal and modern coaching will have the entire team (coaches and players) focused on these factors.  For example, fitness, training quality, team plans, opposition analysis, team culture, team rules, performance measurement and team communication are some of the factors that have a direct and large bearing on the team’s ability to win enough games to simply position the team for a chance to play for a premiership.

Similarly, in business, the goal may be profitability but this outcome is dependent on all contributing factors being aligned to achieve this goal.  Some of these factors include operational efficiency, cost/ waste control, sales plans, competitor analysis, marketing plans, competitive advantage, team performance, cash flow controls and business performance monitoring.

In most small businesses some of these factors will be more important than others due to the nature and size of the business and the systems already existing.  For example, one business may have very good cash flow controls but have poor sales and no sales plan.  In addition the availability of modern cloud based systems have greatly expanded the tools available to small businesses at very reasonable costs to manage some of these factors (i.e. low cost systems for real time business performance monitoring are readily available).  A simple one page plan can be developed to focus and commence action on the priorities very quickly.

The key point is that only looking for profit as a goal is simplistic and misguided and likely to end in frustration.  Identifying the factors required to achieve that outcome and prioritising them into a simple one page plan for immediate action will result in the "wins" required to get the team’s season back on track for the finals.