Category: Laws to Live by

Choose Just ONE Metric

In the words of the Highlander, “There can only be one” or from Jack Palance’s character in City Slickers, “Just one thing. You stick to that and the rest don’t mean —-.”

The point is if you give your team too many metrics to chase or different metrics for different folks , everybody isn’t pulling in the same direction. So, just pick one thing for your entire team to focus on: Profit $, Acquiring New Customers, Revenue, whatever, but make sure there is no question in your organization what it is and everybody is doing everything they can to head toward that goal.

Just One Thing!!

 

Think Twice Before Lowering Prices

Sometimes it feels easy to do what the customer asks and just cut a price a bit. So what if you shave a bit of profit off of your current business, you’re sure you will make it up in volume. Well, let’s see how much volume increase is needed to offset a cut in price starting with say a baseline of $15 with 50% margin…

Cost Cut Volume Increase Needed

…if you decrease the margin from 50% to 45%, you have to grow revenue by 22%. If you decrease by the margin from 50% to 40%, you have to grow revenue by 50%!! On the other hand, if you can manage to increase your pricing marginally, you can decrease revenue quite a bit and still maintain profitability.

Keep this in mind the next time someone says, “Hey, old buddy, old pal, can you hook me up with a little better price?”