#2 of 15: Are you overlooking the 3 basics of business and the 3 key drivers of profit?

15 uncomfortable questions CEOs, Founders, CFOs, CMOs, and CROs Need to Ask Before Spending a dime on growth, sales and advertising

There are three fundamental factors that underpin any market and three crucial levers to pull for any business.

Demand and Competition Level: Assuming there is enough demand for your product, Assess the intensity of competition and entry barriers in your market. Remember the old rule of demand and supply. The degree of commoditization within your industry directly affects your pricing power and your ability to sell. To thrive in commoditized markets, prioritize cost-control strategies and differentiate your offerings.

Product Uniqueness and Value: Is your product distinctive, and can its results be quantified? Demonstrating direct value to customers makes selling easier.

Cost Dynamics: The previous two factors directly influence your cost structure and profit margins. Understanding this relationship is vital to sustaining a healthy profit margin.

Simply put, it’s about the cost of getting in front of customers, the cost of conversion, and the economics of running your business. Remember, these three are extremely factorial.

While these operate at a macro level, they manifest themselves in three crucial variables that require constant attention:

3 key factors that drive profitability

Pricing: Smart pricing is one of the most underrated levers to increase profit. Think beyond conventional pricing models. (The most powerful lever to drive profitability)

Cost Management: Control costs effectively by examining every aspect of your operations. Ensure your assets are fully utilized before considering new investments.

Sales: Increasing sales isn’t solely about acquiring new customers. Focus on cross-selling, up-selling, and increasing the lifetime value of existing customers. (3rd lever to drive profitability)

The right sequence.

Begin by controlling costs and uncovering hidden sales and profits within your existing operations.

Then, explore opportunities to optimize pricing through product/service unbundling or innovative offerings that leverage your existing resources effectively.

Finally, channel your efforts into expanding sales.

PRO TIP:

Avoid the mistake of fixating on just one aspect and expecting transformative results. Instead, create a holistic strategy that aligns pricing, cost management, and sales efforts to unlock maximum value.

Stay tuned for more valuable insights on discovering hidden sales and profit within your operations, optimizing pricing strategies, and implementing effective sales techniques!

The next post will be about the mistake of relying on advertising, discounting, and aggressive selling to cover up a weak product.