I previously discussed the importance of the four multipliers and why it’s important for every business to understand how to improve them, and now I’d like to go into more detail on each one. These multipliers all start with the letter “P”, and they are measures to determine the efficiency and effectiveness of your business. They include: 1) Being purpose driven, striving for productivity, maintaining high performance, and achieving profitability.
1. Purpose Driven. Although profitability is the prize that every business wants to increase, it is listed last because it is the outcome from doing the other three multipliers well. The first thing that needs to be understood is the general and specific purpose of your business. The ultimate purpose of all businesses is to create and keep customers, so your general purpose should be to create a customer-focused organization that strives to improve your customers’ experience and the value you exchange with them.
Your specific business purpose is personal to you. It is the reason you started the business, and why you continue to operate it. This purpose should be found in your vision and mission statement, as well as in the guiding values of your organization. This requires much more than having an impressive vision, mission and values statement written by a consultant or top management. It should be a philosophy that is ingrained in the living culture of your business and shared through the actions of everyone in the organization. When your purpose drives your business, it will have more meaning for you, your employees and the customers you serve. Aligning your purpose with the highest values of your employees and customers will allow you to create a strong bond of loyalty and a shared purpose.
2. Productivity. This looks at the efficiencies within your business by examining your Results to Resources Ratio, or RRR. Results can be measured in many ways other than financial, and you can identify them by tracing the activities that lead up to a financial transaction. For example, look at your lead generation percentages and the costs to generate those leads. Monitor your training costs and the resulting revenue increases that occur after training sessions. You can also set service delivery standards that are monitored to ensure compliance. There are numerous measures that you can use to ensure your business is on track toward achieving its goals and mission.
3. Performance. With productivity, the focus is on the efficient use of resources to produce a result; whereas, performance looks specifically at the results being achieved. It relies on performance standards that can be used to measure and monitor the outputs of a business to determine if they are within the standards.
An important aspect of growth is to identify your key performance indicators, or KPIs, in the important areas of your business, and then focus on those activities to ensure you get the best results possible. It also means you should identify the activities that do not contribute to better performance, and either eliminate them or do less of them.
4. Profitability. How much you get to keep from your business activities is a result of your revenue minus your expenses. The resources required to operate your business will be your biggest expense, and they can be categorized into two categories: the variable and fixed costs of doing business. As you examine your costs and become more efficient in your operations, you will be able to add more to the bottom line. The key is to reduce your costs as a percentage of total revenue without sacrificing quality or service to your customers.
Another “P” that’s not mentioned here is predictability. It should be considered in each of the multipliers, though. By having a clearly defined purpose, you should be able to create a plan and set goals to predictably advance in the direction of your vision and mission. Your productivity and performance will improve if you apply predictability through systems, policies and procedures that enhance these two multipliers.
Lastly, by measuring and testing each of your revenue generating activities, you will be able to identify the activities that create predictable profits in your business. These four multipliers offer you the chance to monitor your activities against your goals or KPIs so that you can continuously improve in each of the dimensions. Ultimately, if you are doing everything right, you should realize your KPI goals, and this will reflect on your bottom line. As you improve in the four multipliers, it will give you greater clarity, focus, and confidence to conquer each business transition challenge, and allow you to achieve sustainable growth toward your vision.
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