FUEL UP Your Growth Engine
By Robert Fish
General Electric’s GE90 class jet engine is powerful enough to power a Boeing 777 airplane in flight for over 5 hours … on just ONE engine. GE is relentless in its engineering efforts to continuously create more powerful, safe, fuel efficient and light engines. But as powerful as this engine is, it cannot produce any thrust without fuel. It won’t even start.
Every company has a growth engine. But, in reality, leaders rarely take the time to inspect and tune it up for maximum efficiency. In a business, fuel is CASH. And the number one way to increase cash is to increase PROFIT.
There are 7 Levers that influence your Profit and Cash Flow, the fuel required to rev up your growth engine to maximum thrust.
Lever #1 – Price
Lever #2 – Volume
Lever #3 – Cost of goods sold (COGS) and direct costs
Lever #4 – Operating expenses
Lever #5 – Accounts receivable
Lever #6 – Inventory or work in progress
Lever #7 – Accounts payable
It’s easier than you think to take actions on these levers and increase your Profit and Cash Flow. The Power of One is a concept that shows how doing something to move those levers either 1% (on levers 1-4) or 1 day (on levers 5-7) in a few critical areas can lead to a significant increase in Profit.
Move The Levers
The Power of One One-Page Tool allows you to calculate the effect on your profit if you can move those levers either 1% or 1 day.
Lever #1 – Price: What’s the value of increasing prices by just 1%?
Lever #2 – Volume: What’s the value of selling just 1% more units at the same price?
Lever #3 – COGS: What’s the value of decreasing raw material and direct labor costs by just 1%?
Lever #4 – Operations: What’s the value of reducing overhead by just 1%?
Lever #5 – Accounts receivable: What’s the value of collecting from debtors just 1 day sooner?
Lever #6 – Inventory: What’s the value of keeping 1 day’s less stock/inventory on hand?
Lever #7 – Accounts payable: What’s the value of paying creditors 1 day slower?
I know what you are thinking. You already know all of this!
But the reality is, most companies don’t take the time to actually measure the impact these small changes can make. You can easily add 3% to your bottom line just by tuning your engine, making small and painless adjustments.
Put the Power of One into action with a simple spreadsheet that you and your team can use to measure the impact of the changes in each Lever. Assign a person to each lever, and create SMART goals and action plans to generate more profit to FUEL UP Your Growth Engine!
(Image: Dale Coleman / Wikimedia Commons)