I watched a webinar on the financial management of agencies last week. Over the course of an hour, a consultant took us through a byzantine spreadsheet that forecast profit based on how your agency was configured. It was filled with numbers, tables, highlighting and took up every millimeter of screen real estate.

Using the spreadsheet you could model changes to your business. What if you hired a new developer? What if you changed your pricing? What if you decreased time off? This impressive spreadsheet could tell you what the result would be.

At the end of the call, he asked for questions.

I asked, “What are the top changes that your clients come back to again and again?”

He thought about it and said, “Raising rates, improving utilization, and sizing their team to match their pipeline of work.”

Powell’s Books is a three-storey book store in Portland, Oregon that occupies an entire block. The business section is one long corridor with wisdom on business that stretches from your toes to as high as you can reach.

When I first started my journey in business, this corridor was hugely intimidating. There was so much advice and so much to learn. As time has passed and I’ve reflected on excellence, I’ve realized that it’s not actually that complex. What is effective is basic. Fundamental. Common knowledge.

What the consultant summed up were just three levers: rates, utilization, and team size. And these derived from an even simpler goal: creating a healthy gap between revenue and expenses. AKA profit margin.

As it relates to business growth, all we’re doing is expanding the ability of a system to turn customer demand into value.

What is highly effective for growing your business will be an expression of this basic idea executed in an optimal manner for your context.

So:

  • How will you expand capability?
  • How will you harness greater customer demand?
  • How will you create even more value?

More on this: Formula for Growth

Featured Image credit: A spoked wheel on display at The National Museum of Iran, in Tehran. The wheel is dated to the late 2nd millennium BCE and was excavated at Choqa Zanbil. Image by Zereshk used under CC BY-SA 3.0