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A mentor of mine once said "Figure out what you are doing that isn't making money and stop doing it". He was referencing the business I was running at the time at the Bank we were both working for. It was such great advice, so simple yet so insightful. I loved the beauty of its brevity but the depth of its possibilities. What he didn't say was that the figuring out part was only the beginning. The true measure of impact would come in the success or not of the execution of the idea. I was lucky. I was able to figure what wasn't making money in my business line and I had the backing of a great boss who supported me during a difficult process of closing down and withdrawing capital from loss making parts of the business. Each step was filled with complex human decisions and emotions, embedded legacy positions and historical perspectives and rationalizations. Nevertheless, I was able to move the liberated resources to new and promising areas and we managed to grow revenues and profits significantly in the following year.
Here are the learnings from that journey:
✅ The Power of Identifying What Isn't Making Money. Analyse and identify the aspects of the business that are draining resources without contributing to the bottom line. It requires objectivity, a willingness to confront uncomfortable truths, and a commitment to change. Here you must balance the decision between continuing to invest in a growth opportunity that has the future potential to be profitable, versus one that doesn't have the necessary conditions to be profitable or doesn't meet your profitability or return targets.
✅ The Execution Phase: Challenges and Opportunities. The real test lies in executing the necessary changes. It requires a delicate balance of rationality and empathy, understanding that tough choices need to be made for the greater good. Navigate the intricate web of human emotions and historical perspectives that often hinder change.
✅ Move Resources to Promising Areas. The next step is to reallocate resources to more promising areas. Develop strategic initiatives and invest in growth opportunities that aligned with the business competencies and market demands. In my case, the liberated resources fueled innovation, expansion into new markets, and the development of products and services with higher profit potentials. Over the following year, our revenues and profits experienced significant growth, validating the effectiveness of our approach.
✅ Lessons for Business Owners and Leaders. This experience taught me valuable lessons that I have reused several times since in other business and can benefit other business owners and leaders:
Embrace the uncomfortable: Acknowledge and confront the areas in your business that aren't profitable and are not likely to become so in the near future. Only then can you create the necessary conditions for change and growth.
Seek support and collaboration: Surround yourself with mentors, advisors, and colleagues who believe in your vision and can provide guidance and support during challenging times.
Make tough decisions: Profitable growth often requires making difficult choices. Be prepared to let go of unprofitable ventures, even if they have sentimental value or historical significance. Be a courageous but fair leader and deal with the human consequences in a fair and empathetic way, remembering that we live and operate in a stakeholder economy.
Foster a culture of adaptability: Encourage your team to embrace change and be open to exploring new opportunities. Nurture an environment where calculated risks are encouraged, and failures are seen as valuable learning experiences.
Over the years as a business owner and manager, I have found that one of the simplest ways to increase profits lies in identifying what isn't making money and taking decisive action to stop doing it. Often the answer is staring us right in the face.
I encourage every business owner and leader to reflect on their own operations and embrace this concept. By shedding unprofitable activities and redirecting resources to promising areas, you can unlock new opportunities, drive profitability, and set your business on a path to success.
Remember, the journey may be challenging, but with the right mindset, support, and execution, you can turn your business into a thriving and profitable venture.
If you would like our help to uncover avenues for extra profitability in your business through business planning, please contact us or visit our Services page for more information.