3 Strategies to Drive Profitable Revenue Growth for Your Business
In the next segment of “Right Away and All at Once,” I read about concepts on building a fortress balance sheet, money-in and money out, and building a team of A-Players. The author discussed the importance of having enough cash on hand to be flexible, acquiring companies during a down-turn to really maximize results, and building a team of A-Players. He furthermore emphasized the necessity of being ruthless about getting rid of those employees that are not A-Players. I found these chapters very valuable; but the one that hit me the hardest was “think money-in versus money-out.”
The author didn’t discount cutting expenses and making sure you are running lean; but he did make a very big point that you can cut costs so much that you make your service or product unattractive to everyone. “You can make a pizza so cheap that no one will want to eat it.” When you focus on trimming costs, you actually end up losing more revenue than you gain. His emphasized: “think revenue growth.”
What are the things your company can do to grow the revenue while you manage your costs, but can also increase your profitability through increasing your revenue? He presented three actions that help you generate profitable revenue growth:
Stop doing things that lose money.
For him, those are operations that are most likely outside of your core operations. You are doing them because they do produce revenue, but they don’t produce profitable revenue. The actual division and activities that go toward these operations actually make them non-profitable.
Focus on your core.
He gave a pretty cool exercise to help you confirm your core. If you ask your customers what they want, they will give you a long, exhaustive list of what they want. But, if you ask them what they want and what they will pay for, the list will likely amount to half a page. That half a page resulting list is your core business.
Consider synergistic product additions or acquisitions that are adjacent to your core competencies
The biggest reason why this would be ideal in production growth pertains to the concept of cross-selling. Once you have a client that is a customer of yours in one thing, what else do they need that is adjacent to one of your core competencies? This becomes a natural up-sell or cross-sell. Consider those businesses out there that present a good opportunity for your database of current customers - that would be a third way of generating profitable revenue.
To recap, cutting costs is important, but it shouldn’t be your #1 focus. Your #1 focus should be generating more revenue, and specifically, profitable revenue.
Manage your costs and drive your profitable revenue growth.
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