Grow Revenue or Cut Costs?
Where is the focus in your organization? Where is the momentum? Where is the ENERGY?
In my consulting practice, I am amazed by the number of companies obsessed with cost cutting. Cutting costs has exceptional appeal to the reptilian brain. It FEELS good. Every penny cut drops right to the bottom line. What could be wrong with that? Nothing and everything. In the right circumstances, cutting costs can be the right medicine, but those circumstances are rare in my opinion. Why? Because you cannot shrink your way to greatness.
Culture is the way the organization functions ON AUTOPILOT. In other words, what does everyone in the organization do automatically, every day? How do they think? What do they focus on? What is the difference between a culture of cost cutting and a culture of growth?
Why cost cutting will never get you there
Let’s look at the ultimate upside for your company under each way of thinking. What is the maximum percentage by which you can cut costs? The theoretical maximum is 100% of course, but what is the maximum percentage in practical terms? For most companies that number is 20%-40% and 40% would be a rare and extreme case. What most CFO’s tell me is that the real number is more like 10% to 20%.
Well that’s pretty exciting! 20% more profit? I’d LOVE to get 20% more profit! That is a BIG number! Yes, it is. But you can only get it one time. You can’t keep cutting by 20% over and over or you will soon be hitting bone (the subject of another of my articles). You will soon deal the fatal cut and be on your way to bankruptcy. So, while it feels awesome to have that one time high, it is worth what that kind of thinking does to your culture? Is cost cutting first how you want your people to think automatically?
To Infinity and Beyond!
Now let’s look at the maximum percentage by which you can increase revenues. It is literally infinite! Not only are there no theoretical limits, there are also no practical limits to revenue generation. You can start growing revenue today and you can focus on it FOREVER and you will still not reach its limits!
So let’s consider what has to happen to grow revenues to infinity and beyond. Your entire company has to focus on your customers, their needs, wants, desires and things they don’t even know they want yet. You must take care of your customers like no one else in the industry. You must be on the forefront of technology. You have to anticipate customer desires, you must be creative, dynamic and innovative. Isn’t this the culture you want for your company? Isn’t this the inspirational ideal embodied in organizations like Amazon, Google, Apple, AirBNB, Uber, Tesla, SpaceX, Solar City, and Virgin? And what is your reward for putting 100% of your time, effort, energy, money and focus on growth? Infinite growth! Rapidly increasing revenues! Higher stock price multiples! Why would you ever trade those for a mere 20% one-time hit?
Culture Drives Momentum
It takes a long time to build culture, to teach your teams how to think and automatically behave on autopilot and it takes even longer to turn your culture, once it is in place. What is the culture you want to create? What is the legacy you want to leave? Which culture will serve the company over the long haul? Think carefully before you choose.
Which Would YOU Invest in?
If you were an investor, with two potential investment choices, one with a 20%-40% potential upside and the other with an infinite upside, which would you choose? Of course you would also consider the likelihood of each investment actualizing its upside and that of course would depend on your belief in the LEADERSHIP in each organization and their ability to execute on their vision.
It All Begins with You
So once again we come back to leadership. The buck starts with you. What kind of a leader do you want to be? Do you want to manage for today or for infinity? Do you want to take the easy way or the harder but much more profitable way? Do you have the revenue generation skills to make it happen? Are you willing to spend the rest of your career learning and mastering the art and science of revenue generation? Do you want to have the most exciting career possible? Because if you do, the sky is literally the limit for you and your company. Live long and prosper.