Is there really such a thing as bad profits? With business getting larger and more powerful, and investors feeling and expecting ever greater ROI, wouldn’t that imply that all profits are good? It is an important question to ask.
Bad profits are those profits that are earned at the expense of customer relationships. Whenever customers feel misled, mistreated, ignored or coerced, then the result is a bad profit. Bad profits arise when a company saves money by delivering a lousy customer experience. Essentially, it means that leadership or the company extracts value from their customers instead of adding overall value.
Those in leadership positions who run companies and manage people understand that the culture you present to your team may lay the foundation for success – not just in the short term but hopefully in the long term. The leaders who have exceptional core values and focus on good profits while eliminating bad profits will not only create companies with long-term success, but will provide products and services that customers will crave, want and need.
When companies do not understand the difference between good and bad profits, the result is that growth suffers in the long term, reputations are hurt, customers become alienated and employees become demoralized. The business becomes vulnerable to competition – it may achieve short-term success, but it will always fail in the long term.
Steps to Eliminating Bad Profits
Bad profits create detractors, who can hurt your company and team members. These detractors can be leaders, managers, employees or customers, and they hurt your company’s reputation, strangle growth and demoralize an organization.
The first step in avoiding bad profits is to recognize they exist; the second step is to recognize the detractors, and then deciding if you can convert your company’s detractors into enthusiastic advocates for your company. This is accomplished with top-shelf internal communication and, of course, sterling customer service.
Create Customers that Promote
Your goal is to focus on good profits from good products and/or services. Good profits are earned with customer’s enthusiastic cooperation – they occur when customers come back time and time again for your products and services. They want to tell their friends and peers about their exceptional experience. When this occurs they become the best promotional arm for your business. As promoters, these individuals provide positive marketing for your company; they are loyal and provide the most cost-effective growth for you and your company.
It has been estimated that most companies have about 42-82 percent of its customers receiving products and/or services as promoters. Your focus should be to improve that percentage as much as possible to boost your good profits – accomplished via employee training backed up by outstanding leadership and communication. This is not only smart business, but good business.
Perform a Company-wide Internal Evaluation
One of the main keys to eliminating bad profits is recognizing the business behaviors that create them in the first place. To effectively identify the areas of your company that bring harmful returns, you must perform an evaluation of your entire operation.
Before you start re-evaluating your company, consider evaluating yourself or the leadership of your business., including the board, partnership or an individual. Look at those who are influencers and find out about their core values. This may be easier than you think.
Spending time with people can tell you quite a bit about that person. If it is a dinner meeting, observe how they treat the wait staff; if it is a golf match, see how they handle a bad shot; if it is at a dinner party, see if they include other people in their conversation, or does the conversation just revolve around them? Do they provide solutions and the action steps to create them, or are they afraid to speak up and state what they feel and why? Are they good listeners?
In the end, would you believe, like and trust this individual? If the answer is yes, you have defined a good set of core values. You should be honest and straightforward; and you should not put profits before people. You should do what is right and not just easy, and that means putting your customer and employees first, and making sure your team members know you are always trying to do what is right.
Once you have the correct core values, the next step is simply putting the correct processes and procedures in place to make your business succeed. Making good profits simply takes constant re-evaluation of leadership (yourself), the team, customer service processes, and the products and services themselves to try to make steady improvement. These improvements do not necessarily have to be major changes – they can be minor tweaks that provide major improvement.
With a laser-focus on good profits business owners and managers can create the correct processes and procedures that will forever eliminate bad profits.
Kevin Coughlin, DMD, MBA, MAGD is an accomplished author, speaker and dentist who provides small businesses with actionable solutions when considering strategic change, as well as keys to compete in an expansive market. Learn more www.Ascent-Dental-Solutions.com.
