The Profit Equation

Profit=revenue-cost. In order for profits to grow, costs must be cut. You must manage cost, reduce cost. This is the most obvious way to handle the Profit Equation. Many companies do this. Your company may be doing this. Companies downsize, outsource, improve technology to make the organization more efficient, more profitable. Cut costs to the bone. But at what cost? For what gain? Do these anorexic companies really increase profits? No. They stay in the game. They stay in business. But cost cutting is not enough to be the best.

The way to really increase profits is to alter another part of the equation. We must increase revenue. I know what your thinking, “Thanks, bud. Real helpful.” But with costs being slashed companies must sell more. We then are faced with the question, “How do we increase sales?” We can try to sell more of the same old thing. But if we really want to see double digit growth, something more needs to be done.

New products. New services. What does the consumer want? Innovation and creativity. One person at 3M was disappointed when his adhesive was not sticky enough. One saw the product that went on to define life in the cubicles for billions. Post-it notes. Recognizing opportunity, being creative, owning our lives…this will be the hallmark of the new economy. Winners will see every failure as a chance to create something fantastic.

It may not be very attractive to you, but in business, family, ministry (insert any other community you can come up with) to be successful, even to survive, change must occur. Who we are, what we do, how we do it…We must deconstruct these concepts and start fresh; start anew. Change or die. Stagnation will lead to failure. What do you need to change in your life, family, business, etc. in order to be more effective.

Profit=Creativity +Innovation