From the very beginning of the conception of a business idea implementing a Profit per X early on can be key to your business success. How and why is what I discuss with Shannon Byrne Susko, the Founder & CEO of Metronome United, on my YouTube channel The Transition Guy. Susko is a big advocate of the Profit per X strategy formed by the American author, researcher and business consultant Jim Collins. He describes Profit per X in his ‘Good to Great’ book. He believes that a successful strategy is formed from overlapping these three questions.
1) What you are deeply passionate about (your ‘Why’)
2) what you can be best at in the world
3) what best drives your economic engine.
Profit per X doesn’t deal in numbers. The Profit per X of your business is your economic engine, your core business. You can use the Profit per X to measure your 10-30 year goal (BHAG). Shannon goes one step further, she says 3HAG is necessary when planning your BHAG. 3HAG is predicting your future growth in 3 years prior to the execution of your BHAG. It is a strategic execution system that drives confidence in predicting the future growth of your company and then makes it happen.
Why is Profit per X Powerful?
Profit per x is a powerful way to measure profitability. By focusing on a specific metric, you can more accurately track and improve your bottom line. Additionally, Profit per x can help you identify areas of your business that may be more or less profitable than others. This information can be used to make informed decisions about where to allocate resources in order to maximize profitability.
When used correctly, Profit per x is an extremely powerful tool that can have a significant impact on your business. If you’re not currently using this metric, we strongly encourage you to start doing so. You may be surprised at just how helpful it can be!
Enables the right decisions
Profit per x is a key metric for making decisions in business. It enables you to see how much profit you are making per unit of whatever you are selling. This is important because it allows you to make comparisons and see which products or services are more profitable. Profit per x can also help you to set prices and make other strategic decisions. Therefore, if you want to make the right decisions in business, profit per x is a metric you need to pay attention to.
Changes your focus
Profit per x is a metric that can help businesses focus on what’s important. By tracking how much profit is generated for each unit of a product or service, businesses can identify areas where they are most efficient and make changes to improve their bottom line. While there are many factors that go into profitability, focusing on Profit per x can help simplify the decision-making process and ensure that resources are being used in the most effective way possible.
Profit per x can be a valuable tool for any business that wants to optimize its operations and grow its bottom line. By understanding where Profit per x is most effective, businesses can focus their efforts on areas that will have the biggest impact.
Differentiates you from your competition
By understanding your Profit per x, you can make strategic decisions to grow your business and improve your bottom line.
To calculate your Profit per x, simply divide your total profits by your total number of customers, products, or services. This will give you a clear picture of how much profit you’re making on each sale.
For example, let’s say you have a business that sells products. If you want to know your Profit per product, simply divide your total profits by the number of products you’ve sold. This will tell you how much profit you’re making on each product.
If you want to know your Profit per customer, divide your total profits by the number of customers you have. This will tell you how much profit you’re making on each sale.
Profit per x is a key metric that can help you understand your business and make strategic decisions to improve your bottom line. By understanding your Profit per x, you can make informed decisions about how to grow your business and improve your bottom line. Often companies may wish to double down on a particular product line or service or in some circumstances where they cannot compete with competitors, they may choose to exit a market and focus elsewhere.
Leads to different priorities
Profit per x can lead to different priorities. For example, if a company is focused on profit per customer, they may be more likely to prioritize new customers over existing ones. On the other hand, if a company is focused on profit per employee, they may prioritize training and retention over hiring new staff. Ultimately, whatever a company’s priorities are, they will be reflected in their profit per x.
Drives growth
Profit per x is a key metric for growth. By focusing on increasing profit per x, businesses can drive growth and scale their operations. Profit per x can be increased by improving efficiency, increasing prices, or finding new customers.
Improving efficiency is the most straightforward way to increase profit per x. This can be done by streamlining processes, reducing waste, and improving productivity. Increasing prices is another way to boost profit per x. This can be done by raising rates, implementing surcharges, or introducing new pricing tiers. Finally, businesses can also increase profit per x by finding new customers. This can be done through marketing and sales initiatives, or by expanding into new markets.
By focusing on profit per x, businesses can drive growth and scale their operations. Profit per x can be increased through efficiency improvements, price increases, or by finding new customers. By increasing profit per x, businesses can fuel growth and scale their operations.
Brings clarity
There’s a lot of talk in business circles these days about the importance of clarity. And for good reason – when everyone in an organization is clear on the company’s goals, it can be a powerful driver of growth and success.
But what exactly is clarity, and how do you achieve it? One way to think about it is profit per x, or P/X.
P/X is a measure of profitability that takes into account all the different elements of a business’s operations. It’s a way of looking at the big picture and understanding where the company is making money and where it isn’t.
The Profit per X approach can be applied to any area of a business, from sales to marketing to product development. And it can be a valuable tool for teams to use to focus their efforts and align their activities with the company’s overall goals.
When everyone in an organization understands and buys into the Profit per X concept, it can be a powerful engine for growth and success.
So what are you waiting for? Get your team together and start thinking about how Profit per X can help you achieve clarity and drive your business forward.
Changes your industry
Profit per x is a key metric that can help you understand how your business is performing. This metric tells you how much profit your business is making for every unit of a particular product or service that you successfully sell. Profit per x can help you understand which products or services are most profitable for your business and which ones are costing you money. By understanding this metric, you can make changes to your pricing or product mix that can improve your bottom line. Profit per x can also help you compare your performance to other businesses in your industry and see where you need to make improvements.
Back to Profit per X – how do we work it out?
Firstly you need to ascertain what the purpose of your business is. The BHAG and Profit per X are intrinsically linked. The 10 to 30 year goal you need to set comes out of the intersection of Jim Collins’ hedgehog concept. Ask yourself these questions to find your Profit per X first, prior to planning your 3HAG and then your BHAG. What is your core business and what is your understanding of what you can be best at in the world? Can you make money doing it – the economic engine? That will give you a clear Profit per X. This allows you to move forward to your 3HAG.
Profit per X Examples
Profit per x is a term used to describe the amount of profit generated for each unit of a good or service produced. It is a key metric for businesses, as it can help to indicate how efficient a company is at generating profits.
There are several ways to calculate profit per x, but the most common method is to divide the total Profit by the number of units produced. This will give you the average Profit generated for each unit.
If you want to know the Profit per x for a specific product, you can simply divide the Profit generated from selling that product by the number of units sold.
Here are some examples of Profit per x in action:
- A manufacturing company might use Profit per x to compare the Profit generated from different products. By looking at Profit per x, they can see which products are more profitable and make decisions accordingly.
- A retail company might use Profit per x to understand which items are selling at a higher margin. This information can then be used to make pricing decisions or stock more of certain items.
- A service company might use Profit per x to track the profitability of different services offered. This information can be used to make decisions about which services to offer or how to price them.
Profit per x is a valuable metric for businesses of all types. By understanding Profit per x, businesses can make informed decisions about where to focus their efforts in order to maximize profits.
Good to Great Profit per X Examples
Profit per x is a metric that measures the profitability of a company. It is often used to compare the profitability of different companies or to compare the profitability of different products within the same company.
The concept of profit per x was popularized by Jim Collins in his book Good to Great. In his book, Collins argues that companies need to focus on creating value for their customers, rather than simply maximizing profits. Profit per x is one way to measure this value.
There are many different ways to calculate profit per x. The most common method is to divide the total revenue by the number of customers. However, other methods may be more appropriate depending on the business and the products involved.
Below are some examples of how profit per x has been used:
- A software company may calculate profit per x by dividing its total revenue by the number of software licenses sold.
- A manufacturing company may calculate profit per x by dividing its total revenue by the number of products sold.
- A retail company may calculate profit per x by dividing its total revenue by the number of customers served.
Profit per x can be a useful metric for companies to track, as it can help them to focus on creating value for their customers. Additionally, it can be helpful for comparing the profitability of different companies or products.
Planning your 3HAG
If you’re serious about achieving big things, you need a 3HAG.
A 3HAG (3-Year Highly Achievable Goal) is a powerful tool developed by Shannon Susko of Metronome Systems. It’s designed to help you focus on and achieve a specific, measurable goal within a 3-year timeframe.
Here’s how it works:
1. You start by identifying your 3-year goal. This can be anything from launching a new product to increasing sales by 20%.
2. Once you have your goal, you break it down into 3 key milestones that you need to achieve in order to reach your goal. These milestones should be achievable within 1 year.
3. For each milestone, you create 3 action items that you need to complete in order to achieve the milestone.
By following this framework, you can ensure that you’re making consistent progress towards your 3-year goal. And because each milestone and action item is within a manageable timeframe, you’re less likely to get overwhelmed or discouraged.
Planning your BHAG
Jim Collins, author of the best selling business book Good to Great, famously popularized the concept of the BHAG. A BHAG, or Big Hairy Audacious Goal, is a long-term objective that is both challenging and inspiring. It gives your company something to strive for, and can help you focus your efforts and resources.
However, simply having a BHAG is not enough. You also need to have a plan for achieving it. Here are some tips for planning your BHAG:
1. Make sure your BHAG is specific and measurable. The more specific and measurable it is, the easier it will be to develop a plan to achieve it.
2. Involve as many people as possible in the planning process. The more buy-in you have from your team, the more likely you are to achieve your BHAG.
3. Develop a timeline for your BHAG. This will help you track your progress and make adjustments to your plan as needed.
4. Set milestones along the way. Milestones can help keep you motivated and on track towards your BHAG.
5. Be flexible. Your BHAG may change over time, and that’s okay! Be open to revisiting your plan and making changes as needed.
When it comes to achieving big things, planning is key. By following these tips, you can set yourself up for success in reaching your BHAG.
Next step is the key function flow map.
Prior to moving onto the BHAG sit down with your team and plan the key function flow map. What are the functional roles that exist in your business today? An example of a functional role is: head of company, sales, marketing, manufacturing, development, finance. What are the three to five key functions in your business that actually make the company money? What functions generate your economic engine.
This is the foundation of everything in your business. And then we ascertain what non-fiscal things flow through your business. What do the individuals in your team control? Then we can see what things we need to make better, faster decisions about, to scale up the business and find our BHAG.
By setting out your plans this way, finding your Profit per X, your 3HAG, your key function flow map and then finally your BHAG, you create confidence within your team. They can see the flow and aims of the business clearly mapped out for them. They can get excited about the growth of the business. It becomes collaborative and creates a sense of ownership within the team.
It’s important to check back in on your Profit per X regularly. I advise clients to do it every 90 days. A check in, not a reworking of it. The hard work has been done at the beginning. For some high growth businesses a quarter can feel like a year so it is important to check in on your original Profit per X to ensure it’s still working for you. Businesses constantly evolve and it’s important to go with that and not remain static.
If you want to speak to me about Profit per X, head over to the contact me page.
FAQs
What is Profit per X?
Profit per X is a term coined by Jim Collins in his book Good to Great. It refers to the idea that a company can increase its profit margin by focusing on a specific metric, such as customer satisfaction or employee productivity.
Collins argues that companies should not simply strive to increase their profits, but should focus on improving their profit margins through initiatives that improve specific metrics. He cites examples of companies that have successfully increased their profit margins by focusing on metrics such as customer satisfaction or employee productivity.
While some may view Profit per X as a simple cost-cutting measure, Collins argues that it is much more than that. He believes that it is a way for companies to focus on what really matters and to create sustainable long-term growth.
In today’s business world, it is more important than ever to focus on profit margins. With the advent of the internet and the globalization of businesses, companies are facing increasing competition from all over the world. In order to stay competitive, they need to find ways to improve their profit margins. Jim Collins’ Profit per X provides a framework for doing just that.
If your company is looking for ways to improve its profit margin, Jim Collins’ Profit per X is a good place to start. It provides a framework for thinking about how to increase profits by focusing on specific metrics. And it offers concrete examples of companies that have successfully increased their profit margins by following this approach.
What is the Hedgehog Concept?
The Hedgehog Concept is a business strategy developed by Jim Collins. It is based on the idea that businesses should focus on their core competencies and align their activities around a single, unifying goal. The concept has been popularized in Collins’ bestselling book Good to Great.
The Hedgehog Concept is based on the ancient Greek parable of the hedgehog and the fox. In the story, a fox attempts to eat a hedgehog but is unsuccessful because the hedgehog curls up into a ball, protecting itself with its spines. The moral of the story is that it is better to be small and well-defended than to be large and vulnerable.
In business terms, the Hedgehog Concept suggests that businesses should focus on their core competencies and align their activities around a single, unifying goal. This allows them to be small and nimble, while still being well-defended against competitors. The concept has been popularized in Collins’ bestselling book Good to Great.
The Hedgehog Concept is a useful framework for businesses that are looking to improve their performance. It can help them to focus on their strengths and align their activities around a single, unifying goal. By doing so, they can become small and nimble, while still being well-defended against competitors.
What Drives Your Economic Engine Examples?
1. Jim Collins
Jim Collins is a business journalist and author who wrote the best-selling book Good to Great. In it, he talks about the concept of the economic engine – what drives a company’s growth and profitability.
2. What is an Economic Engine?
An economic engine is the underlying force that drives a company’s growth and profitability. It can be things like innovative products, efficient production processes, or a loyal customer base.
3. Examples of Economic Engines
Some examples of economic engines include:
- Innovative products or services: A company that constantly introduces new and improved products or services is more likely to grow than one that doesn’t. Think about companies like Apple or Tesla.
- Efficient production processes: A company that has streamlined and efficient production processes is more likely to be profitable than one that doesn’t. Think about companies like Toyota or Samsung.
- A loyal customer base: A company with a large and loyal customer base is more likely to grow than one without. Think about companies like Nike or Coca-Cola.
4. The Bottom Line
The economic engine is the underlying force that drives a company’s growth and profitability. It’s important to identify what your company’s economic engine is and make sure it is running smoothly if you want to be successful.
What Does an Economic Engine Mean?
Jim Collins, a world-renowned business consultant, popularized the term “economic engine” in his 2001 book Good to Great. He used it to describe the combination of processes and people that create value within an organization.
An economic engine is the heart of any organization – it’s what drives growth and profitability. To be successful, organizations must have a well-oiled machine that runs smoothly and efficiently.
The most important component of an economic engine is its people.
Without talented and dedicated employees, an organization will not be able to compete in today’s global economy. The best organizations attract and retain the best talent by investing in their people.
In order to achieve long-term success, organizations must have a clear vision and purpose. Jim Collins believes that the most successful organizations are those that are “built to last.” They have a clear sense of who they are and what they stand for. This allows them to weather the storms of economic downturns and other challenges.
The best organizations are also those that are able to adapt to change. They continuously innovated and find new ways to grow and succeed. Jim Collins calls this the ” Flywheel Effect .” This is when small changes cumulatively lead to big results over time.
To sum it up, an economic engine is the combination of processes and people that create value within an organization. It is the heart of any organization and what drives growth and profitability. To be successful, organizations must have a well-oiled machine that runs smoothly and efficiently. Jim Collins believes that the most successful organizations are those that are “built to last.”
They have a clear sense of who they are and what they stand for. This allows them to weather the storms of economic downturns and other challenges. The best organizations are also those that are able to adapt to change.
“Remember, failing to learn is learning to fail.”
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