Doubling the Bottom Line

What would you do with the extra money if you were able to double the bottom-line profits of your company?  You should take a minute to visualize what that might look like. Would you put more into savings for retirement?  Would you put more into a college savings account?  Would you purchase a vacation home?  What would you do with the extra money?

Let me be clear, the doubling of your bottom-line profits is well within your reach.

Most small-to-medium sized (SMB) manufacturers believe that they must double their top-line revenue in order to double their bottom-line profits.  The fact of the matter is the doubling of profits is rarely associated with the doubling of revenues.  The doubling of profits should come with a modest increase in revenues when coupled with an even sharper increase in Gross Margins.  And while there may be any number of possible approaches to accomplish this, the approach that we employ at EBITDA Growth Systems (EGS) has yielded a doubling of profits for virtually every client that we have encountered. 

The approach leverages a really powerful equation – Technical Skills X Business Acumen = Success.  On a scale of 1-10, it has been our experience that SMB manufacturers rate an 8-9 in terms of Technical Skills.  In other words, they typically know how to machine parts.  It has also been our experience SMB manufacturers rate a 2-4 in terms of Business Acumen.  Because this is an equation, as Business Acumen approaches zero, so does the likelihood of success (profits).      

Business Acumen means different things to different people.  For the purposes of the equation, business acumen may be defined as an in-depth understanding of how your business works, how it makes money, and how strategies and decisions impact financial results. 

Developing business acumen begins with a 1-3 year Strategic Plan for the business.  The Strategic Plan provides the business with direction and becomes its “true North”.  Once the 1-3 year strategy has been established, five tactical plans will need to be developed –   Financial PlanSales PlanMarketing PlanOperations Plan Management Plan   These plans will be executed in the current fiscal year and should move the business forward towards its strategic goals.    

The Financial Plan defines your revenue and profitability goals for the fiscal year.  Your revenue goals dictate the contents of your Sales Plan.  Your Marketing Plan identifies the number of leads, and the various lead generation tactics, that will be required in order for you to achieve your sales goals.  The Financial Plan also defines the gross profit and operating profit goals for the fiscal year.  Your Operations Plan lays out the labor, materials, 3rd party processes, etc., requirements that will be necessary to yield profitable production processes.  Your Management Plan addresses the frontline management development, workforce planning and employee engagement strategies that are necessary for you to effectively attract and retain talent.

It is the interplay between these five plans that create Business Acumen!

Get Business Acumen right and your chances of success – the doubling of profits – increase dramatically.  Get it wrong and you will continue to experience the single digit profitability that is so prevalent in our industry.

So, what would you do with the extra money if you were able to double the bottom-line profits of your company?  Start thinking about that because it is well within your reach. 

Business Owners – More Alike Than Different

It is probably appropriate at this point to share a very important message from our company.

My partner Dave and I are two very different people –

  1. I am black.  Dave is white. 
  2. I am a Democrat and Dave is a Republican. 
  3. I pursued a formal education path that included a BA, MBA and Juris Doctorate.  Dave pursued a Tool & Die apprenticeship under a German Master. 
  4. I love basketball.  Dave can take or leave basketball.
  5. Dave loves hockey.  I can take or leave hockey.
  6. The next move for my wife and I shall be to a rancher close to the city.  The next move for Dave and his wife will be a rancher as far from the city as possible.

Despite all of our differences, it was the pursuit of business that brought Dave and I together.  I read an article a couple of years ago that stated that business is the only remaining institution that people [Americans] trust.  I think that I agree with those sentiments.  I think that the “great game of business” provides an incredible bridge for people with all kinds of “differences” to come together for the common noble purpose of the pursuit of profits.

In actuality, the more time that Dave and I spend together it becomes more and more apparent that we are more alike than different.  We obviously are both human beings, so from the standpoint of DNA we are 99.9% the same!  We are both Americans that love this country and we are both Christians that love the Lord.  We are both husbands and fathers, and the list goes on and on.

We need to celebrate our differences.  I know that this is an overused phrase, but that doesn’t make it any less true.  At our company, EBITDA Growth Systems, Dave and I share a vision to substantially increase wealth creation amongst small to medium-sized business owners.  We also share a mission to double the profits of our client companies within three years.  We have been incredibly successful because we have been able to leverage one another’s uniqueness (differences) to deliver a particularly potent professional services offering.

Obviously, celebrating differences applies to more than just business success.  Celebrating differences applies to every walk of life.  We are infinitely more alike than different, but the areas where we differ should provide a source of tremendous strength for our businesses and for our communities.

Business Owners – More Alike Than Different

It is probably appropriate at this point to share a very important message from our company.

My partner Dave and I are two very different people – 

  • I am black. Dave is white.
  • I am a Democrat and Dave is a Republican.
  • I pursued a formal education path that included a BA, MBA and Juris Doctorate. Dave pursued a Tool & Die apprenticeship under a German Master.
  • I love basketball. Dave can take or leave basketball.
  • Dave loves hockey. I can take or leave hockey.
  • The next move for my wife and I shall be to a rancher close to the city. The next move for Dave and his wife will be a rancher as far from the city as possible.
Continue reading “Business Owners – More Alike Than Different”

The Risk-Return Trade-Off for Small Business Owners

Let’s begin by acknowledging the tremendous amount of risk that is associated with starting a new business or purchasing an existing business.  Virtually anyone that you come in contact with on a daily basis has an idea for a  new business.  Very few people, however, have the resolve to actually pursue their idea(s), particularly if they are already gainfully employed.  A willingness to accept the reality that you wake up every morning unemployed is the first in a long list of risk factors that make entrepreneurs special.   

So, the question becomes why would anyone take on such a risk?  In my estimation, there is a two-fold answer to this question. 

First and foremost is the allure of pursuing the “American Dream”.  Let me provide a prospective.  Ticketmaster was an IAC property back in the 2000’s, and they were a Management and Leadership Development client of mine at that time.  I was invited to attend several worldwide conferences during my tenure at Ticketmaster and I remember distinctly a presentation by an international demographer that hypothesized about why people come to America.  This demographer suggested that Frenchmen go to Germany to find a job; that Germans go England to find a job and that Englishmen go to Spain to find a job.  And then he said, “but people don’t come to America to find a job, they come to America to chase the American Dream”. 

Thomas J. Stanley and William D. Dankoto spoke to the second part of the answer in the The Millionaire Next Door.   In the book, Stanley and Danko wrote: “… self-employed people are four times more likely to be millionaires than those who work for others.” Of the non-retired millionaires surveyed, they found that two-thirds of them were small business owners.  In fact, they found that most American millionaires (about 80 percent) are first-generation wealthy.  In other words, it is reasonable to assume that you may generate out-sized profits in exchange for the risk associated with an entrepreneurial venture.

At EBITDA Growth Systems, our brand promise is that we will double the profits of our clients or we will return their fees.  We have never had to write a check and return fees because we have a robust repeatable system that virtually guarantees our success.  This enables us up to commit all our efforts, energy and resources to helping our clients realize a favorable risk-return calculus.