A major goal of many companies is to make money ? in other words, to increase their net profit. To better understand how to achieve this at your own business you need to understand net profit growth engines. David Jaeger, mentor at Result Kitchen, explains what are net profit growth engines as well as how to apply the concept to make more money. Here is a summary of some of the ideas discussed in the podcast:
The Three Options
There are three ways businesses can make more money. Your first option is to cut costs but continue to achieve the same results. Your second choice is to spend less but make the same or more. The last option, if you are willing to try it, is to spend more to make more.
The problem is that businesses rarely know which method would be the best in their situation. To make matters worse, it is common for business managers to think they need to cut costs because they are failing to receive their desired results. However, if you keep costs the same and increase your gross profit, you will be making money.
The Net Profit Growth Engine Concept Explained
By using net profits as a growth engine for your company, you will always drive a profitable cash flow. However, to properly implement net profit growth engines, business owners need to look at the big picture.
To start, you need to consider where you are with your business in terms of factors like SEM and PPC campaigns. There is a big difference between a company with mature campaigns and a business that is just starting out.
For instance, new businesses always need to spend more to generate earnings. This will also give them a better feel of their ROI. In fact, in the initial stages net profit is less important ? rather, you need to scale and figure out ways to become successful.
Once you have made some progress, are capturing the market, and are in the top positions at least somewhat profitably, you can start cutting back in some areas. This involves pulling back on the main channels and focusing on another growth engine. For example, if you had been focusing on Google AdWords, this could be a comparison shopping engine, Yahoo Gemini, social media, or something else entirely.
The net profit growth engine concept is based around the stage at which your business is. This may sound simple, but it is not obvious. The concept shows that sometimes you need to take a step back and look at your business from a different angle ? the answer as to what you need to do next will be right there in front of you.
To learn more about net profit growth engines and to gain ideas of how to implement the concept into your business, listen to the Big Business Challenges podcast, the Net Profit Growth episode.