In the reality TV show, The Profit, entrepreneur Marcus Lemonis turns around small businesses in exchange for equity. It’s entrepreneur porn, where situations are dramatized, rough edges are obscured, and complex choices simplified. With that caveat, it’s still fun and useful to watch another entrepreneur make choices in 40 minute case studies.

One of Lemonis’s go-to tasks is to seek out, “the numbers.” As in, revenue, profit, and expenses for the business. Then he drills down looking for opportunity in products that are highly profitable or expenses that don’t provide much value to the business.

A few days ago, I proposed a simple framework for identifying opportunities for growth:

  • Create new value
  • Extract predictable profit from this value
  • Deliver value independent of the entrepreneur (Maintain)
  • Expand without explicit direction from the entrepreneur (Grow)

I also proposed a test for “Create New Value” shortly after, and I’d like to propose another test today that is in the spirit of Lemonis.

For “Extract predictable profit from this value”:

You can state the few variables that determine profit and their expression this week.

If this is true:

  • Value creation is consistent enough to measure
  • You know the primary KPI’s
  • You know your cost to produce value
  • You’re monitoring and managing them on an ongoing basis (week)

This test doesn’t tell us everything about creating predictable profit and we probably need at least one more under this heading, but it’s a sizable piece of the pie.

For your main services or products, can you state their KPI’s and actual numbers this week without having to go look them up?

Featured image is of a woman teaching geometry. Illustration at the beginning of a medieval translation of Euclid’s Elements, (c. 1310). Used under public domain.