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Is your business profit-sensitive or profit-driven?

Is your business profit-sensitive or profit-driven?

Finding the balance that helps you meet your goals

All businesses are profit-sensitive, but they don’t have to be profit-driven. Being profit-driven can be thought of as being so profit-sensitive that you forget to be sensitive to other things that are just as important as making money.

Being profit-sensitive, on the other hand, is maintaining a healthy focus on financial success without compromising your overall definition of success --- in both life and business. Basically, its the kind of clear thinking you need to make sure your business helps you get what you want out of life.

What we’ve noticed: businesses switch from profit-sensitive to profit-driven

There’s been a handful of sad stories in business over the years that have kind of broken our hearts. Remember when your favorite musician was still creative, and came out with fresh concepts for every album? Remember when they went mainstream, sold out, or simply ran out of steam at the end of their career? You know the feeling, then --- there’s that disappointment, that this seemingly abundant source has somehow dried up. The well has gone dry and a light has gone out of the world.

Consider American Girl: the company was established in the 90’s and quickly became a hit. Mothers and daughters both coveted the product for the historical fiction stories that came with the dolls, and this gave them something to bond over. Customers paid a premium for a premium product that had its own special significance. That significance has all but evaporated, though. The company sold to Mattel in the early 2000’s and changed the product forever, from a treasure to a commodity (the pre-Mattel dolls are now collector's items). The effect the brand once had on mothers and daughters everywhere has diminished, and an experience that mothers used to share with their daughters has left us, too. Mattel followed a format that they have used on other commercial toy lines, and it resulted in a weakening of a unique strength that customers valued.

We’ve watched other brands fall prey to the commercial machine. Many brands that used to be the standard for quality and authenticity now have a heavy focus on appealing to trends and cutting costs. We’ve seen everything we valued so much about REI, Helly Hansen and Abercrombie & Fitch bleed out of the the air slowly hissing out of slow leaking tire.

When a brand changes what it stands for, both employees and customers can be alienated. Other things can be neglected, too, like relationships, and staying close to the wok you’re passionate about --- and these might be the very things you need to help you remain effective as a business owner, leader, partner, and supplier.

How to recognize when you’re thinking profit-driven, and shift back to profit sensitive

Running your own business offers a handful of things that are not available to a traditional employee. It's about more than the money: it's about autonomy, freedom, wanting to make a different kind of impact, passion for your product or field, and creative control. Make a note to yourself about which ones are most important to you, and strive to keep these things in focus.

Weigh your different interests against each other. How important is profit to you? Is your measure of success personal growth or business growth? Is it in how much you sell or in what you do for the world? What’s going to happen if you get detached from the process you’re passionate about?

Growing without compromising what’s important

Growth is necessary for survival. If growth is your goal, scaling up with a focus on top line revenue or bottom line profit may not be the best way. There are other ways in which you can improve your company’s capacity to impact your life.

Accepting new business indiscriminately can end up causing you to stray from your original purpose. This can end up hurting both you and the customer. So at Inquisitek, we prefer to focus on the customers we can provide the most value to and get the most value from in return.

As you grow, you will find it necessary to make changes in your business. Consider a change you made or might make. Is this a change that will provide more value to your customers or purely to save money? The former is probably profit-sensitive – providing more value to your customer while also making a profit – while the latter is probably profit-driven – forsaking customer value for better numbers.

Getting to your profit-sensitive sweet spot

This is just about being honest with yourself, so that your goals serve your best interests. You can find the balance between profit-sensitive and profit-driven with a searching and fearless inventory of your motivations. The worst outcome would be if you became overly profit-driven, and because of it your profits suffered.

Here are a few questions you can ask yourself to find your profit sensitive sweet spot:

  • How do I define success for my business?
  • What is the true cost of more money and/or more business, and is it worth it?
  • Why are you trying to grow?
  • What form of growth should I pursue?
  • Why does wealth interest me?

These are questions we ask ourselves as well. Let's work towards a more true business community.

The growth of local businesses is our business. To have a conversation about how you can accelerate your growth in the ways that will help you meet your definition of success, you can click on this to fill out our quick four-step contact form