As I see it, there are really only two main ways to increase your profits:
1. Add something (attracting new customers, opening additional locations, offering more products or services, etc.)
2. Subtract something (lowering costs, dropping unneeded products or services, restructuring the company, etc.)
But before you start adding or subtracting anything to your company, you need to be aware of the potential consequences of each action:
More is more (adding): From grade school math we learn that “more” is better (If you have two quarters and Tommy gives you two more quarters, how many quarters do you have?”). However, more is not necessarily better. More can cause people to “freeze up” when faced with too many choices. More can cause waste, slower response times (think of it as extra pounds around the waistline) and bigger heads (“we are better because we are bigger”).
Less is more (subtracting): “Less” also comes with its own set of potential problems. Many companies start down the trail of slashing or altering unnecessary products or services and the costs savings adventure becomes addicting. You may ask yourself, “if I can still sell my soup by watering it down only 1% more, think of the costs saving if I watered it down 10% more!” Remember the game Jenga? The object of the game is to take away one wooden block at a time from a tower of blocks until the tower topples over. Taking away from your company until you are flirting with collapse is never a good idea.
Whether you decide to add or subtract (or a combination of the two) to increase your profits, remember that altering your company always comes with consequences.
Filed under: Business |