Profit First Chapter 7 Summary: Found Money

Cutting costs and increasing sales are not the only ways to increase profits.

In fact, you could be wasting your time if you don’t first optimize business operations.

Increasing sales to an inefficient business is like pouring water into a leaky bucket.

Sure, those extra sales will raise your bottom line, but you will not be capturing all the value that you can from each sale.

By working towards an ultra-efficient business you are plugging those leaky holes. Then when you pour water into it, you will be able to hold more.

Increasing efficiency is an ongoing process. Get as efficient as possible, then sell more, then improve efficiency even more.

In order to build an efficient business you need to minimize.

Minimize your offerings and minimize your clientele.

Once you are serving a streamlined solution to the same types of clients—your dream customers—then you can grow by duplicating those clients.

A streamlined solution is one that has the fewest offerings that best serve the needs of your dream customers.

The offerings that best serve.

Clearly define who your dream customer is, then serve them in the best way you can by offering a specific solution to their specific problem.

For every aspect of your business, aim to get double the results with half the effort. That effort refers to both time and money.

This is not easy. It forces you to think bigger. The payoff is exponential in efficiency, and therefore profit.

Start by focusing on just one aspect of your business that benefits customers. Pick one component and figure out how you can double the results with half the effort. Do this with a different aspect of your business each week.

Take a look at all of your clients and sort them by the amount of profit they generate. You will probably find that a small percentage of them bring in the majority of the profit.

You will also find some that actually result in a loss!

It usually takes the same amount of effort to serve a big revenue client as it does to serve a low revenue client. Furthermore, low-revenue clients are sometimes the most troublesome.

Politely offload those unprofitable and troublesome clients and you will see profits rise and stress levels go down. This also makes room for more of your dream customers.

Think of your favorite customer.

When you focus on getting more of this same type of client, the type of client with similar needs and behaviors, you will discover a few benefits.

First, you will become super efficient since you will be laser focused on providing your specific solution to a specific type of customer’s specific needs.

Second, you will love working with them so you will naturally serve them better.

And third, you will get natural networking effects. Similar clients hang out in the same circles. Make a client happy and he or she will tell others.

Seek out your dream customers by going where they hang out. And once you have them, nurture them.

At first glance it seemed to me that this chapter was aimed at service-based business, but after a little thought I realized the same principles can be applied to a product centered business, which mine is.

Efficiencies can be introduced to your processes. Marketing, order processing, deliverability, etc.

The concept of a dream customer is directly applicable. Target higher quality customers that will pay more and have less complaints.

And finally, firing bad clients is not only applicable to seeking a higher quality target market, but also in getting rid of poor performing products, or at least not wasting time to actively market them.

Read the next chapter here.

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