Proactive Solutions for Outlasting the Competition

Louis Meeks
CEO
The Service Source, Inc.

Like Magic: Materializing New Profit Centers

I have found that many business owners , myself included, find themselves in a particular business or industry resulting from a crazy string of circumstances. As a result, we find there is some profit center with which we are stuck, and that happens to be typical of the industry. For example, in our Officeville business we make a markup from our COGS to the price we charge customers. The problem is this happens to be a very commodity-oriented business with very little differentiation amongst competitors. You may be asking yourselves why we would get into such a high-commodity, low profit business. It s a long story with one of those crazy strings of circumstances! Nevertheless, here we are. We have this challenge in front of us to identify new profit centers. As you can imagine, it s a lot of fun trying to build a profitable business in a commodity-based industry with multi-billion dollar competitors !

Business in America is becoming increasingly competitive. Most business owners are experiencing pricing pressures. This results in declining profit margins and ultimately, decreased profits. Is your business facing these pressures? If so, how are you addressing the problem? Are you searching for new profit centers or simply accepting the declining margins? If you analyze your profit trends over the last five years and project them out over the next five, how does it look? If you don t like the results of that analysis, you better do something about it. The first challenge is determining what to do.

In my view, the smart approach is to understand the reality of your industry and its future and deal with it proactively. With such a seemingly daunting task, where do you begin? I believe you begin by taking your key managers and/or business advisors offsite for a strategic planning and brainstorming session. We rent a room at a local hotel and conference center with a big whiteboard, easel and big rolls of paper.

This typically costs $100-$150 for the day. Here are a couple secrets. First, call to reserve your room the day before you are going. This should save you 50% versus the regular rate. Second, don t let them serve coffee and donuts . You will not like their prices. Bring your own. This begins with defining the process.

Now that you have pulled everyone together, write down your objective. For example, one objective may be to identify a new profit center within the next ninety days. Next, go through what is called a SWOT analysis. This process includes getting opinions and writing down what everyone believes your company s Strengths, Weaknesses, Opportunities, and Threats to be. Discuss your industry and your key competitors. What are their strengths and weaknesses? How can you turn their weaknesses into your strengths? As a small business, we are inherently more nimble and flexible than some of our competitors and we try to use that to our advantage. Do you have that same advantage? Who is the fastest growing company in your industry and why?

Do not expect to leave your strategic planning session with all the answers. That is not the goal. Remember, this is a 90 day project, not a one day project. The key is to leave the meeting with a set of questions, action items and accountabilities. I recommend the team reconvenes in 45 days to discuss interim findings and challenges. Ultimately, you want to ensure the project is on track to meet your 90 day deadline

What are some examples of action items with which you might come away? First, the questions of who is most profitable and what are the underserved and profitable niches within your industry will likely not be easily answered . The answers are most likely hidden. I suggest you call friends and acquaintances in your industry. Get their opinions and perspectives. Go to industry conferences. Trade journals and associations are usually great sources of information. Call the editors of the journal. They have great insight, are usually passionate about their industry and love talking about it. Call the President of your association. Talk to your suppliers. Ask them who the progressive, ambitious and growing competitors are. Call these competitors. Meet them. Fly to them. In essence, if you are committed to win, you will do whatever it takes.

Again, the key to finding these profit centers is doing your homework. By studying the industry and talking to other business owners in your industry who are facing similar problems, you can often discover a great new source of profits or perhaps an area you had underestimated. Obviously, focus on those who are not your direct competitors. Someone in your industry is growing and taking market share. Find out who and why.

Your team should arrive at the 90 day meeting at the conference center with a wealth of information with which to make some big decisions. If, after this process, you have been unable to identify where to go to increase profits, perhaps you are in a dead end industry. If so, get out! As one of the world s great investors once said, If you marry a great management team with a business with bad economics, the bad economics will win every time.