In the late 1800s Wallace Wattles wrote a book called The Science of Getting Rich. Wattles lays out a system to follow to achieve wealth by doing things in a certain way.
In a nutshell, it presents a blueprint that anyone can follow to become rich.
While the language in the book is dated, and some of the concepts are exaggerated, the book holds some valuable lessons that we can apply to our business. The process of increasing profitability in your company doesn’t need to be a mystery. You too can follow a system, and run your business in a certain way to increase the bottom line.
The system which will be presented here is the Science of Profitability – a formula you can follow to increase profits in your company.
The Science of Profitability involves three components:
- Build a culture of profitability
- Know the numbers
- Implement the Profit System
- Build a Culture of Profitability
- Create a Profit Mindset in your company. The Science of Profitability starts with getting the right philosophy, the right mindset. Philosophy is a system of thought. A Profit Philosophy is a system of getting everyone in your company thinking Profit First. Every day, in every way, everyone in the company should be thinking Profit First.
- Begin with the end in mind. When creating your Profit Plan start with the bottom line. It’s rarely done. We do the sales forecast, then the operating expense, and the bottom line is the by-product. Flip it around, and put the bottom line first.
- Commit to the needs of your company first. Beer wholesalers serve many masters – retailers, suppliers, employees. Commit to serving the needs of your company first; commit to profitability.
- Produce Profits on Purpose. Sometimes we create profit (or loss) by accident. Maybe we grew sales or reduced expense and managed a profit – was it intentional? Create a purposeful profit plan and follow it diligently.
- Know the Numbers
- The Three Pillars of Profitability: Sales, Gross profit, and operating expenses. Each plays a vital role.
- Understand the Math behind Profitability. Educate yourself and your team on what the numbers mean, how to control them, and what each person’s role is in shaping the bottom line profitability of the company. Profit is everyone’s job.
- Implement the Profit System
- Know the score. Use a metric to track how well you are doing with The Three Pillars
- Educate your team on what the metric is, and how it’s calculated. Show them how they can make a difference and improve the result.
- Set a goal to improve the score. Use industry benchmarks, or benchmark against past company performance. Communicate the goal to those who can influence the outcome.
- Monitor the score and track progress. Provide regular updates to your team.
- Celebrate the win. When you hit the goal, take a moment to celebrate and praise the team. Free beer works well here.
Wallace Wattles was on to something back in the 1800s – there is a science to getting rich. There is also a science to increasing profit in your company. Build a culture of profitability, know the numbers, and implement the profit system. Wallace would be proud.
Download the free Science of Profitability Checklist below and increase your business profits today.