What is profit?

action-outcome-rule

In my Introduction to Strategy workshops I sometimes do this informal Q & A.

What I do is ask the participants to tell me in one or two words, “What is profit?”

A one or two word answer is all I look for – not some long-winded explanation.

And some of the answers I get are very interesting. For example:

· Profit is what’s left

· Profit is an objective

· Profit is a goal

· Profit is money

· Profit is revenue less costs

· Profit is a reward

· Profit is a gain

· Profit is a return

Nice answers. But not the right answer. At least not the answer I want.  And the right answer is….

Profit is an outcome.

Yes indeed. Profit – or more specifically – a profitable customer, is an outcome. What do I mean by this?

Quite simply, a profitable customer is what you get after you perform certain activities in your business.

You see, actions determine outcomes. And profit doesn’t automatically come out of thin air.  

So if you want to improve profits?  You have to improve the activities or actions from which they derive.

Let’s look at a golfing analogy to explain this further.

In the game of golf, your activity starts at the beginning of a hole when you tee the ball off.

And, provided you don’t hit the ball out-of-bounds (a golfing term for an extremely bad shot), you then move onwards to your ball and hit it again.

The bottom line is that you keep hitting the ball until you putt it into the hole.

A holed putt is an outcome. It represents your total score for that hole.

Everything leading up to that holed putt were activities.

Furthermore, the better you perform the activity of hitting the ball, the better your score, or outcome, will be.

Let me give you another example.

At the start of each new year, millions of people throughout the world set a resolution to lose weight.  They want to be trimmer in other words. 

Unfortunately, for all the good intentions, most people fail to achieve this simple resolution.  Why?  They don’t focus on their actions. And the actions?

Unless you have a rare genetic condition, the actions involved in losing weight are actually quite simple.  You need to:

  • Eat less bad food
  • Exercise more

Ultimately, if you focus on the activity of eating less bad food and exercising more, you will become trimmer.

In golf, if you want to improve your score, you need to improve the activities that lead up to the score. 

If you want to lose weight you need to focus on the weight loss activities.

And in business you need to focus on the activities or actions that get you profitable customers.  And what are these activities?  Take a look at the Strategic Growth System.

strategic-growth-system-815

Highlighted above are the key strategic and execution activities you need to perform in order to become profitable, accomplish your vision and to sleep well at night.  That’s the stuff in the right hand column.

But, to get to get there you need to perform the strategic and execution activities outlined.  When you successfully perform those activities you will get the results and the outcomes you’re after.

The drive-into-your-brain message?  Profit is an outcome.  Focus your attention on the activities that generate the outcome and not the outcome itself.