IF the purpose of business is “Making Money” then basically all you care about is:
- How to Increase Sales
- How to Raise Prices
- How to Lower Cost
IF making money is all that you care about, then why not sell the whole kit and kaboodle and invest the proceeds? Why else would anyone want to put up with employees, unions, Federal and State regulations, landlords, clients, you name it? Could it be that there is a driving force that’s bigger that all that possible aggravation?
There is only one legal business whose purpose is to make money; The US Mint.
Their business system is specifically set up to print and mint legal tender.
In other words, the purpose of their business system is to actually make money. All other businesses have to EARN money.
How to EARN money?
Businesses EARN money in exchange for goods or services.
If you are the sole provider of a good or service in a market then people have no choice but to buy from you or choose to forego the benefits of your goods or services. As a monopolist or oligopolist you can pass on your inefficiencies to your buyers in the form of a higher price. As a buyer, your only choice is to buy or not to buy. Furthermore, you will also have to put up with any lack of effectiveness or stop patronizing that business altogether.
However, most of the time you are not the only supplier; there are others providing similar or substitute products and services to your market place. Now you’ll have to compete for buyers’ favor. After all, buyers determine where they spend their money; not you nor your competitors. Indeed, you’re not battling the competition, but pleasing the buyers.
Because you cannot please every buyer all the time, you need to specialize or niche your value proposition. You will attract those buyers that believe what you believe. Those buyers become your loyal customers who need little incentive to buy from you time and again. Price is not an important issue in their purchasing decision, although they might try a rivaling product or service when enticed by a special promotion. But when that product fails to meet the buyer’s expectation, it will also fail to win over his/her patronage. In poor economic times, having built a loyal customer base is priceless.
What is more efficient, building a loyal customer base or having to incentivize every sale you want to make? Offering discounts and rebates drain profit margins, which is especially painful in a poor economic climate. Compensating for this loss of income by cutting benefits from the value proposition makes you even less attractive than before. As a result, you risk loosing loyal customers over selling a lesser product for the same price. So, you lower your price or increase the quantity and both reduce your profit margin. How long can you keep up this downward spiral?
What People Want
You can fool some people some of the time, but you cannot fool all people all the time. People want the biggest bang for their buck. So, obtain your operational efficiency from raising the quality of your production and delivery system rather than eliminating benefits from your value proposition; using inferior ingredients or lowering quantity per delivery.
Raising quality of production and delivery raises product or service quality. Such products and services perform better within the client’s setting and thus increases satisfaction. Satisfied customers are your best advertising and public relations you can buy.
Also, employees take pride in doing their job well; it gives them satisfaction and makes them engaged and loyal employees who have your best interest at heart. Key talents that are dissatisfied will leave your employ and leave you to fight the War for Talent.
Furthermore, higher quality products and services require less rework and incur fewer warranty claims. Every activity that needs to be done outside the standard production and delivery routine is exponentially more expensive.
Realizing a Unifying Vision
Do you remember why you went into business? Didn’t you have a splendid idea based on a vision for the future? You wanted to produce something that you were proud of and to that end you designed, built, implemented, maintained and managed a business system that could realize that vision for you, right? So, what’s the purpose of your business system? You’ve got it, realizing a vision!
Now that you have grown your business to where it is today, you are closer to realizing that vision. In the process you earned money, including a profit margin that paid for that growth. Therefore, your best employees are those that share in your vision; when they believe what you believe then everyone is united in working on the same cause. Have you ever met any one who is excited to get up every morning with the prospect of making money for someone else in return for being treated as a low-price fungible commodity; an expense item? I know I haven’t!
If you want to improve your top- and bottom line results, you’d better improve the quality of your production and service delivery because it will lower your cost, increase your loyal customer base and win the war on talent. Why does Management Education make business so difficult and hard to comprehend? It’s not about the money; money is the reward for a job well done. So, create a quality business system for doing a quality job, delivering quality goods and services that satisfy the needs of all stakeholders and Bob’s your uncle!