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Accelerate Profitability

Updated: Apr 1


Green trees growing ever larger, also signifying growth in profits.

Growing companies must act quickly when an opportunity presents itself. Acting quickly, however, should not put the business at unnecessary risk. Our blogs on “Accelerating Growth and Impact” provide valuable insights for growing mid-sized and smaller companies.


Introduction


Profitability is key to increasing growth and impact. It provides cash for business investment, which leads to more growth and greater profitability. With growth come additional opportunities for impact. The result is a virtuous cycle of profitability, growth, and impact.


My recent blogs have focused on the 5 Keys to Accelerating Growth and Impact. This blog demonstrates that accelerating profitability fits well within this framework.


Key #1: Focus


Start-ups typically have limited resources of money and personnel. They must focus on a limited range of profitable products or services.


Once profitable, a business can thoughtfully expand its focus and offerings. It should also frequently evaluate where it makes money, and drop less profitable offerings.


The return of Steve Jobs to Apple provides a classic example of the value of focus. He quickly got the company focused on selling standardized laptop and desktop computers for consumers and professionals. Four products – that’s it. Apple quickly accelerated back to profitability. As the company grew and became over more profitable, it introduced more product lines and products.


Key #2: Prepare early


Making decisions that increase profitability requires good data. The data should be at a granular level that provides actionable information on sales, expenses, and profits. Data gathered over a longer period of time is more valuable, hence the need to prepare early.

Insights from these metrics can support planning activities such as a product review, a SWOT Analysis, or annual strategic planning.


Key #3: Continuous improvement


Continuous improvement is like pushing a flywheel that accelerates profitability. (I’m not sure that this makes sense, but try to envision it.) Each improvement leads to a better product that is produced more efficiently and uses fewer materials and resources.

Improvements can be significant, such as designing a new generation of a product. Improvements are based on insights from the previous product version and developing market needs.


Other improvements can be incremental – small changes that save a few dollars here and there. Small changes add up over time to a lot of dollars dropping straight to the bottom line.


Key #4: 80% is good enough


Key #4 (80% is good enough) aligns with Key #5 (delegating wisely.)


The time spent on activities and decisions should be consistent with their importance. Don’t waste time and money on perfection when perfection is not required. Activities and decisions with minor impacts can proceed quickly. The organization benefits by becoming nimbler and reacting more quickly.


Leadership should pre-emptively decide who makes what kinds of decisions. (See Key #2: Prepare early!) Lower-level employees should make decisions where they’re closer to the problem and are better informed. Senior managers can make decisions that require seeing the bigger picture. But don’t let senior management coopt all decision-making and grind things to a halt!


Key #5: Delegate wisely


Delegate non-critical decisions down into the organization. Lower-level team members can make timely decisions without the delay of waiting for senior managers. (Time is money!) Decisions at a lower level may also be superior due to the team member’s intimate knowledge of the situation.


“Wise” delegation requires carefully selecting team members who have the capacity to make good decisions. They should receive appropriate training and oversight that helps them to be successful and grow as valuable employees.


Contact Zbig Skiba to find out more about using the 5 Keys to Accelerate Profitability. zskiba@skiba-associates.com

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