In keeping with the theme of strategy, I want to explore a few more items from my post called, 10 Things Your Business Strategy May Be Missing. In this post, I will explain why your company’s Profit/X, Critical Numbers and Company Priorities should all align. These tips will be useful in starting a VoIP company of your own, or any type of business for that matter.
Let’s start with your Profit/X (profit per “x”). As I mentioned in my top 10 post, Profit/X comes down to the actual method(s) of how you choose to make money. Your Profit/X could be creating Profit per Region, or Profit per Visit to business. Profit/X should be your end result in strategizing metrics and not operations. The Profit/X is a single KPI you can use to monitor your progress. It is also referred to as the economic engine of your company. Most airlines use a Profit/X of revenue per seat or profit per mile. Southwest Airlines, for example, focuses on maximizing profit per plane, which aligns with their strategy.
At VoIP Innovations, our focus is on DIDs and DID Management, which aligns with our Brand Promises of providing Choice, Automation, and Control to save customers time. With this being said, what do you think our Profit/X is? You guessed it, Profit/DID. Every decision we make is wrapped around increasing our Profit/DID. DIDs are the butter on our bread. It wasn’t always like this; our Profit/X was Profit/Customer. On the surface it made perfect sense, but we quickly found out Profit/Customer made us focus on non-primary (not the butter) services. It is important to know who you are and to always keep this your number one priority.
Critical Numbers represent mile markers for your Profit/X. They tell you how far you have gone and how far you still have to go in order to reach your quarterly and annual goals. I mentioned earlier that VoIP Innovations’ Profit/X is Profit/DID, so what would our Critical Numbers be? The answer: DID costs and DID revenue.
If I can reduce my DID costs and increase or remain strong on my per DID revenue, I will reach my Profit/DID number.
It’s important to note that you can only squeeze so much cost out of your services before quality becomes an issue. There is a correlation between quality and cost, especially in the telecommunications industry. You may find a floor on your costs but there is no ceiling on revenue. Coming up with new revenue streams is the only way to increase profitability, if you have cut all the fat out. So, remember when you pick your Critical Numbers, make sure they support your Profit/X and counter balance each other. VoIP Innovations had one Critical Number dealing with revenue (revenue/DID) and one dealing with cost (cost/DID). You have to watch both sides of the coin. Ultimately you design your business to win, strategizing with critical numbers that define milestones that will rally your employees around a common goal and direct focus.
Company Priorities are where you will list what you are going to contribute this quarter to accomplish your one year Critical Numbers and reach your Profit/X. I refer to Company Priorities as Big Rocks. These Big Rocks support your Critical Numbers and provide direction for your staff. Each Big Rock should have an assigned due date as well as a person to be accountable. Everyone should have at least one Big Rock assigned to them or a task associated with a Big Rock. This is where you get complete alignment. Every person on your staff has their piece to push on. Think of it like a big rock that needs pushed across a football field in less than one hour. It is much easier and quicker if we all push from the same side of the rock and everyone knows what his or her job is to get this boulder moved. It is no different with your business except our Big Rocks usually aren’t tangible.
A Final Note
As you can see, each one of these items leans into the next item, creating a funnel effect, and it all starts with your Profit/X. Well, it actually starts with your belief system and core values but for the sake of these three items, it starts with your Profit/X and works its way down to Company Priorities to keep your team focused and aligned. If you would like to learn more about these items along with much more strategy content, download my new eBook, Building an Industry Dominating Strategy when it is released in the near future.
Edited by Daniel McFarland