I’m amazed by the myriad of “tips” and “secrets” you can find on the web, lists of things you could do to solve virtually any problem. The experts creating these lists mean well, its good food for thought. But most would also admit that there is no magic, one size fits all, recipe for success, particularly when it comes to solving a profitability problem.
Be it a company with 10 employees or 500, success in attacking a profitability problem is almost totally a function of having an accurate definition of the problem, and coming to that definition is easier said than done. Common pitfalls when doing the needed analysis include: confusing symptoms with the root cause, defensive thinking, and a scope or focus that is either too narrow or too broad.
Moreover, it’s very important that the definition also be actionable. Analysis may have identified the problem as one product, a clear money loser on its own, but dropping that product may risk losing key customers who buy multiple products and prefer to use one supplier to fill all their needs. The problem needs to be redefined so that the solution avoids assuming a high risk of undesirable results, such as creating another profitability problem.
If profitability is a concern, wise CEO’s will invest in the analysis required to come to an accurate and actionable definition of the problem. It is equally wise to consider the value of using an outside expert who can bring a high level of analytical skills to the table, and provide greater assurance of independence and open mindedness in the analytical process.
JCJCo., Inc. provides business and financial consulting services to companies in transition. We tackle financial management challenges commonly caused by high growth, rapid changes in the marketplace, business combinations, employee turnover and other unusual or disruptive events, filling the need for expertise on an interim or outsourced basis.