I was a big football fan in my teenage years and the team I liked to follow was the Green Bay Packers. The Packers were coached by the legendary Vince Lombardi. Lombardi and the Packers won the first two Super Bowls. However, years before they won the two Super Bowls, the Packers were anything but champions.
Lombardi came to Green Bay from the New York Giants. He had a reputation as being an offensive genius and a stickler for fundamentals. He did not believe in fancy. He believed in basic execution. Get the basics right and execute them right. Do this over and over again and you will beat your opponent. Not complicated. The story is told that when Lombardi saw the Packers in the first practice after he became a head football coach, he was not impressed. After the practice, he told the team they were going “back to the basics.”
At the team meeting the next day, Lombardi picked up a football, held it over his head for the whole team to see and said, “Gentlemen, this is a football.” Now that is basic!
It is not uncommon for business owners and CEOs to have to remake the business model for their companies. This requires them to go “back to the basics” of their business. Forget about the things that you want, determine what you must have and get rid of all the rest.
In business what do we mean by “basics”? The business equivalent of Vince Lombardi’s statement, “Gentlemen, this is a football” can be summed up as “earn a profit!” This statement is true whether the business climate is good, or the business climate is not good. The goal for every business is always to make a profit. Profit is not a dirty word. If a business cannot make a profit, the business is not viable. It will not last. When the business closes . . . people lose their jobs, vendors do not get paid, investors lose their money. Therefore, the objective of every business must be “earn a profit.” Marginally profitable is not enough. The objective must be to maximize the profit.
So how do you maximize the profit for your business?
Maximize sales of profitable goods or services
If a business has more than one product or service, the gross margins will most likely vary for each product or service. The challenge is to focus the effort of your sales force on the promotion of the most profitable product or service. All sales are not equal. A shift in the sales mix to a more profitable product or service can substantially improve your net income (profit).
Work with customers that allow you to be profitable
All customers are not equal. Some customers are always working on your sales force to reduce the sales price. They may bring you a large sales volume, but they constantly work on you to reduce your sales price. Other customers may never complain about your price, but they are “high maintenance.” They constantly return products, or they call in at the last minute requesting your service immediately and do not allow you to efficiently schedule their service work. There are many variations of a customer that is “high maintenance”. In this instance, the sale price is not reduced but the cost to serve the customer is higher than the typical customer. In either case, customers that whittle away at your sales price or customers that are “high maintenance,” your net income (profit) is reduced.
Keep your cost model in line with the current business climate
In spite of what you hear in the media or from our politicians, business cycles are a natural occurrence in the business world. Successful businesses adjust their cost models to be profitable in good times and bad times. A bad business climate is never an excuse to accept losses. Successful businesses want to come out of bad business climates “lean and mean.” This not only means a lean cost model, but it also means not being overextended with debt. There will be opportunities when the business climate moves from bad to good. If you have incurred a high debt load to survive the bad business climate, you will be unable to take advantage of opportunities to move into new markets, add new products or maybe even purchase at discounted prices a competitor that is struggling to survive. Or worse yet, you may survive the bad business climate only to become the business that is struggling to survive. This is the type of business that is the acquisition target of one of your competitors.
Reward your best employees, replace your worst employees
This is hard. Many businesses, especially small businesses, become like families. Despite the feeling of family, it is still a business and businesses have to make a profit. Businesses consistently make a profit by hiring and keeping good employees. Consistently work to identify and reward your top-performing employees. These are the superstars of your company. Treat them and compensate them as superstars so that your competition does not hire them away from you. The last thing you want is for your best employee to start working for your competitor The next objective is to encourage employees that are not top performers to improve and become top performers. This group should be trained and motivated to encourage them to improve their performance and move into the category of top performers. Finally, you must deal with employees that consistently rate at the bottom of the performance charts. The first objective for this group is to make sure they are working in a job that properly matches their skills with the needs of the job. The next objective is to make sure the employee is properly trained to perform the tasks necessary for the job. If none of this works, then employment with the company must be ended.
Constantly seek to remake your company to stay ahead of your competition
Every business has competition. You cannot escape this basic fact of business. Competition comes from other businesses that do the same thing you do OR competition will come from new technology or changes in consumers’ desires or trends. Small business owners and CEOs must always look at ways to better serve their customers. This can come from an analysis of better ways of delivering your current service or product. It can come from an analysis of the new and different products or services that your current customers are seeking. When a customer asks for something that you cannot deliver or do not provide, as the owner or CEO, you must determine if it makes sense for you to add the requested product or service to your business. If customers are asking you for it and you do not provide it, then the customer will get it from somebody else.
Listen to the customer
In every business, the customer is king (or queen)! Change your company as often and as frequently as necessary to provide your customers with what they are willing to purchase from you at a price that allows you to make a profit. Remember, somebody is out there every day trying to take away your good customers. Good customers are loyal to businesses that consistently provide them the products and services they are seeking at a competitive price or a good value. Your competition will take these customers if they can provide your customer a better product or service at a better price or value.
“Gentlemen, this is a football.” This statement is a return to the basics for an NFL football team.
“Businesses earn profit.” This statement is a return to the basics for the business owner or CEO of a business.