The Power of One: Unlock the 7 Levers to Drive Business Growth

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Currently, many executive leaders are urging their teams to hit unclear targets, while these same leaders are frustrated by underperformance in profitability and cash flow. In many cases, the leadership team is not even aware of cash flow and profit targets as they have not been set or communicated.

“You can’t hit a target you cannot see, and you cannot see a target you do not have.” - Zig Ziglar

If you want to hit your targets, you need to know what they are. The challenge is most managers, and even some founders, don’t really understand the financial metrics and the levers they have to drive them. 

In addition to the financial targets – you and your team must also know the key drivers to influence those financial targets. The Power of One concept helps accomplish this. 

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Cash is King

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Revenue is vanity.

Profit is sanity.

What is the Power of One?

Cash is king.

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For many entrepreneurs, their first love is their idea – their product or service. Their second love? Revenue. They become overly focused on revenue and don’t provide enough visibility to what truly matters – cash. Ask yourself: Are you generating enough cash to scale the business?

Not all revenue is created equal and growth sucks cash. As you scale up, it becomes more critical than ever to generate sufficient profit and cash flow internally. Business leaders can fall in love with revenue without accurately understanding the implications on profits and cash flow.

Recently, I was with a client in the landscaping industry whose leadership team was inspired by The Power of One tool to stop pursuing high-profile RFP projects.  The co-founder revealed that the work was stressful, strained their workforce, and despite generating robust revenues, it yielded low margins and sometimes even incurred profit losses.  Despite flat revenue growth in 2023, bottom-line profit and cash flow saw significant improvements by refusing to pursue these projects. This change in strategy has reduced stress on the team and eased the challenge of labor shortages in a competitive market and delivered increased profits and cash flow. The co-founder expressed gratitude for the Power of One tool and for teaching his team that revenue is vanity, profits are sanity, and cash is king.

The Power of One is a simple yet powerful tool that businesses can use to educate management on the key drivers for enhancing profits and cash. It highlights where a one-percent or one-day change can significantly impact cash flow and profits, introducing new metrics that enable managers to easily measure the increased cash flow and profitability resulting from their efforts.

We've provided a helpful worksheet that equips you to identify the seven levers that your company's management can influence to improve profitability and cash.

‍Click here to download a copy of the Power of One tool.

The 7 levers explained:

1. Price: Increasing the price of your goods and services can have the most significant impact on your bottom line, nearly 100% of the time. Many sales teams push for discounts to close sales, often overlooking how much additional volume is needed to generate the same profit and cash flow. This tool provides clear insights into the necessary volume adjustments when altering prices, helping to make informed decisions that enhance profitability.
   
2. Volume: Boosting the number of units sold at the same price directly influences your revenue. While conventional wisdom suggests that more sales are always better, the focus should be on profitable sales. Many new clients reduce volume (taking stress off the organization) while increasing bottom-line profit and cash dollars.‍
3. Cost of Good Sold (COGS) (Direct Expenses): Lowering the cost of raw materials and direct labor is the second most critical driver of profit and cash flow for many organizations. While there are potential savings in materials, significant gains typically come from better utilization of direct labor. Having a well-trained management team can ensure that labor is highly utilized and profits are maximized.‍
4. Overheads: Reduce your indirect costs to maintain healthy operating profits (EBIT/EBITDA). Many entrepreneurs initially believe cutting overheads are the key to profitability. However, real financial gains often come from better management of pricing and direct expenses. Surrounding yourself with an A-Player management team, while increasing overheads, can lead to more effective management of direct expenses and increased profit

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Working capital

5. Accounts receivable:  A sale is only a gift until you get paid. Demonstrating the number of outstanding receivable days, along with the associated profits and cash tied to each day, can motivate the team to adopt strategies such as progressive payments, advance billing, and faster collections. These practices can transform your company from functioning like a bank that finances your customers into a company that quickly receives cash payments for the quality services delivered.

Watch the webinar replay now and start focusing on cash flow today. If you need personalized guidance on applying the Power of One to your business. schedule a consultation with me.

6. Inventory/WIP: Recent supply chain challenges have led many companies to increase their inventory supplies. Knowing the impact this is having on cash is important. By implementing disciplined approaches to inventory and work in progress (WIP), you can unlock significant cash flows for your business.  

7. Accounts payable: If your accounts receivable show how you act as a bank for your clients, accounts payable reveal where your vendors act as a bank for you. Understanding the importance of favorable terms on your company's cash flow will encourage your team to work closely with vendors, fostering true win-win partnerships. 

Get Started

Embarking on your journey to accelerate cash flow and boost profits requires strategic planning and disciplined execution. Begin by assembling the right team, and documenting the drivers of profits and cash flow. Use the list below to start your brainstorming.

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Accelerate cash and profits

• Where do we need to uplevel our talent? 
• What mistakes are costing us excessive labor and materials?
• Where can we shorten cycle times to get invoices produced faster?
• How can we improve our business model to collect cash quickly?

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Marketing and sales execution

• How can we narrow our focus on profit share instead of market share?
• How can good-better-best pricing help us maintain pricing power?
• How can we do more business in our most profitable segments? 
• How can we sell more value and avoid downward pricing pressure?

Drive Sustainable Growth with the Power of One

The journey to business growth begins with understanding and leveraging the right financial tools. The Power of One equips you with the knowledge to make strategic decisions that drive profitability and cash flow. By focusing on the seven financial levers, optimizing your business model, and empowering your team with financial insights, you can unlock success the RISE way. 

Dive deeper into the Power of One tool in my recent webinar. Discover how this powerful resource can transform your business into a cash-generating, profitable machine. 

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