May 2005

teve Wheatly, the manager of a successful luggage and travel accessories store, recently cut off a Google ad campaign that promoted a product on the company's website. He was paying as much as $93 per sale, but the product retailed for only $53. That kind of upside-down ROI was the impetus for immediate action, right? Nope. Wheatly reluctantly admits that he'd been watching the situation for more than 18 months before finally pulling the plug.

"I just didn't want to give up on the sales," he says, sheepishly.

Unfortunately, this is not an isolated example. Wheatly's tale—the story is true, though his name has been changed to protect the guilty—is not uncommon. Many business managers are much more focused on—and have a much better picture of—their revenue than they do of their profit. The focus on the top line versus the bottom line is an issue for companies of all sizes. For example, the Wall Street Journal recently reported that one of the Fortune 500 was reviewing its cost structure for the first time in 10 years. But it is a more pernicious problem for many small businesses that don't have the luxury of deep pockets and complacent investors.

It's 5 p.m. Do You Know Where Your Profit Is?
Improving profitability requires first that you focus on it. When you talk about your company do you describe it as a "$2 millions (sales) company or a "$100,000 (profit)" company? When you talk about how you're doing at the end of the day or week or month, is it in revenue or profit terms? Are your incentive schemes based on revenue or profit? Do you even know from month to month what your profit is?

Improved profits are essential to support new growth—in your department, company or solo practice. They may be absolutely required if business is in jeopardy. There are too many jobs lost and too many lives diminished by unnecessary business failures. Don't wait until you are forced into survival mode.

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