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Building Business Profits: The Roadmap Strategy: Issue 5

Apr 26, 2005

We all work hard and opportunities often steer our focus and goals towards a single opportunity or method. Steve Pohlit, CPA, MBA, asks us to take a Side Road on The Roadmap Strategy and look at The Need To Step Back Before We Continue Moving Forward.

This series is for people running their own business, thinking about going into business or working for someone and wanting to make a valuable contribution to the success of that company. There is a sequence to these reports. For maximum value, please start with Issue 1.


Today A Side Road on The Roadmap Strategy. The Need To Step Back Before We Continue Moving Forward.

This week, my work with a very good business ended. It was a premature ending. Certainly, we had made significant progress with sales hitting record numbers, new products introduced to the market, and a number of key strategies starting to kick in. The owner simply wanted to stop. He didn’t really want to continue down the path we had defined and were following.

This leads to a key point. You will be successful at exactly it is you want to do. I have now added a module to front end of The Profit System (www.TheProfitSystem.com ) to examine what it really is that people want.

Joe Vitale just released the book The Attractor Factor. The book has motivated me to address the ‘What Do You Want” question. For example, I know now that a number of companies I have worked with are at a performance plateau because the owners do not really want to do the things that will take their business to the next level of success. In fact, I realize now that in some cases they don’t really want to be in business at all.

On the other hand there are plenty of people who know they are on the right playing field but need the coach for the right plays.

So I am asking you the question: do you know what you want? I’ll leave the personal side of this discussion to others much more qualified than me. On the business side, if you like your business. If your business is really what you want to be doing, then you owe it to yourself to follow the sequential steps outlined in these reports. After all companies are paid in proportion to the value they deliver to the marketplace. The Profit System teaches you how to maximize that value and be paid accordingly.

In a later edition I will discuss niche marketing in greater detail. For now I will mention this principle as it is key to long term maximum value. In my business there are niche markets. As an example, I am close to having The Doctors Profit System ready for roll out. For this niche I am adopting the fundamentals of The Profit System for medical practitioners. Being associated with the founders of Diabetes In Control has resulted in me working on this service.

Think about your business. Evaluate the customers you serve and start noting the different requirements of that customer base. Their needs represent additional opportunities for your business.

Moving Forward:

In Issue 3 I mentioned we would begin to go deeper into the rationalization of expenses. Let’s briefly review the math. If you are providing professional service then the formula is simply Revenue (professional fees) minus expenses (payroll, rent, utilities, supplies) equals profit before tax. If you are selling products then you have revenue from the sale of those products less the cost you paid for them. The difference is gross margin. From gross margin expenses are deducted and hopefully net profit is the result.

For many companies, the singe biggest expense is payroll. Most businesses think in terms of what they pay people plus the benefit package and finally the taxes associated with having employees. Those taxes include employment tax and workers compensation. Generally, companies budget what they feel they can afford to pay and then hire a person who fits within the budget.

In my experience companies overlook two mission critical factors when considering payroll costs. The first is the contribution an employee makes to a business and the second is the cost of turnover. We will discuss turnover and the value of employees in greater detail in the next issue. For now when you look at the people working in your business when certain people come to mind as being loyal, hard working and valuable, I recommend you thank them. Do it today. If any of those same people are underpaid, let them know you are evaluating ways to improve their pay. I will give you some ideas on how to do that next time.

The following is a reminder from the last issue:

Stay Focused:

It seems to be nearly universal that there are only about a handful of items that make the most difference in your business. And while the list is short, most companies fail miserably in allocating the right amount of time and resources to this list.

Why is that? Distractions – a large number of small items that steal the time out of your day. Maybe it is your cellular phone, a coworker, mail, email, or any one of a large number of incidentals. Regardless of the items, the day comes to a close and the major items – the ones that will propel your business or career into the stratosphere have been ignored.

I recommend an easy to use A, B, C system. List your key tasks. Those that make the most difference should be in you’re A category. No more than 20% of your tasks should be in the A category. Focus 80% of your time and energy on the A tasks and you will make remarkable progress.

Coming Soon

In the next article in this series, we will continue our discussion the employee component of the expense structure plus we will review the primary legal structures for doing business. Until then, be well and prosper.

About the Author:

Steve Pohlit is the President of Exec Net Consulting and the Chairman of the Diabetes In Control Advisory Board. Steve is as professional speaker on “Build Cash Profits or Close The Doors”.