Inside the Minds Stuff - Inside the Minds. Managing for Profit. Leading CEOs on Key Strategies for Increasing Profits Exponentially in Any Economy

Kevin Price Founder & CEO AccuCode

Evolving Profit Centers

The most obvious method for determining the main profit centers of a company is by a measurement of revenue and net profit. However, this could provide a very narrow view of what the real profit centers of your business are. The best measurement that I know of comes from direct customer feedback. A wise tactic for gaining the right kind of feedback is going straight to the top twenty percent of your customer base and asking them some very directed questions, such as:

• Why do you do business with our company?

• How did you first come in contact with our company?

• Why did you first decide to do business with us?

• Why do you continue to do business with us?

• What do we do better than anyone else?

• What do we do well? What do we do poorly?

• What other products, services or solutions would you like to see us add to our offerings?

The answers to these questions will point you toward the real profit centers in your business. In the case of most well run companies the answers to these questions and the true profit center of your business will evolve over time. This mutability is expected in small businesses and a company that wants to grow will find a way to adjust to the changes.

For example, our company started out as a value-added reseller of automated data collection and mobile computing technologies. Our primary source of revenue and gross margin contributions were initially from the sales of bar code related products. Over the eight year history of our company, the value-added portion of our business has expanded to include consulting, process engineering, network design and installation, software design, software development, implementation services, repairs , supplies and follow-on support. The sale of hardware drove the demand for all of these services. However, over time as the hardware margins in our sector of the industry have eroded (they do in all technology markets; it s the nature of all technology product sectors), the services have become the primary purpose of our business and the main reason that our customers do business with us. Today our customers engage with us primarily due to our software development expertise. However, eight out of ten of them first came into contact with us due to our hardware resale activities.