Controlled Profits Members — Controlled Profits

Profit Controller

2

Pricing

Pricing is a key lever for profitability. A lot of companies compete on price as the key differentiator between their products and their competitors. This is a losing strategy because you cannot control your suppliers’ costs and you have no backup selling proposition, such as quality, color or service. People who buy on price only are not loyal customers. Therefore, you must find ways to package and communicate more value for your customers to reap profit margins adequate for survival. If you sell quality and service, you will always have customers willing to pay your price. Your pricing must continuously be tested for maximum profit. Improper Pricing can leave money on the table. From a portfolio standpoint, whatever is not being reaped, is being wasted.

3

Volume

“Do you want fries with that?” Everyone who has gone to McDonald’s has heard this and makes jokes about it. Guess what? McDonald’s thinks it is funny too. That’s why they continue to laugh all the way to the bank. Imagine if for every sales receipt, by asking a simple question or making a complementary offer, you increase your profit by 50% on that ONE sale? Increasing the volume (sales dollar) amount for each transaction must be an active and planned activity. Packaging & promotions assist in getting more sales per client. Increase dollars per transaction and units sold.

Conversion (%)

4

Conversion

Sales conversion is the percentage of people who buy your products. You will find most companies that are not a sales company, do not measure their conversion ratio. Ironically, if this factor was measured, tested and controlled, it can be the main driver of your profitability. You must track, measure and continually improve your conversion ratios. Your offer has been declined. Know why. Measure their behavior. Communicate their benefits, and split test.

Profits per Time Period ($)

5

Productivity

Productivity in its most basic form is the ratio of outputs over inputs. Since we are controlling profits, we are inherently controlling costs. Therefore, productivity forces you on squeezing your resources to get the most output, which is incremental profit for each cost unit employed. Improving productivity has a compound effect on all the other profit equations because it is a core property of your business’ total cost structure. It is one of the first things to address in order to NOT leave profits on the table. In this regard, Productivity relates to Variable Costs. Are you squeezing your assets, or are you collecting them? Assets are used to increase ROI. Eliminate COST Centers.

6

Efficiency

Efficiency describes HOW WELL you do something. Every activity has an upper limit in its ability to perform up to its maximum specifications. Therefore, efficiency is 'what percent of maximum' are you operating. Efficiency and productivity can be intertwined, for Controlled Profits, efficiency is measured as a business model construct, relating to your fixed cost structure. Standard Operating Procedures enable the right things to be done, the right way. Model, create, use, test and master efficiency.

7

Frequency & Continuity

Turnover or frequency represents how often your customers (now clients) come back for repeat, complementary or higher value products that you offer. The more your clients buy from you at a profit, the more increasing profits you earn. The reason why this is so, is because your marketing costs for new customers are not used for clients you already have. Therefore, this is where you leverage client relationships. The extension to frequency is represented by Continuity (or persistency) and is also known as Lifetime Customer Value. You should plan to earn the right to be the preferred supplier of your clients’ goods or services for as long as they need them. Of course, this ‘lifetime’ period will be different depending on what you sell. Remember, by HAVING a client, you will also have the opportunity to continue to make complementary offers of products, information and ongoing service contracts. This continuity must be planned.Heavy equipment, buildings, land and such have long life cycles. Most products, and all services do not. Increase persistency.

8

Virality

While not a profit driver, If your product can be scaled, it can be viralized. All markets have limits. The issue is your path for growth.