Sometimes profitability is only a few chess moves away. You might not need a capital raise, access more debt, or factor your receivables to improve your access to capital.
Perhaps the denominator (your expenses) only require a few adjustments.
Here is what we’ll cover this week:
- Your 3 chess moves away from >$100,000 more in profit.
- Shed “expense pounds” will have you running 4-minute miles.
- Create a Hub & Spoke model to minimize potential communication challenges.
Your 3 chess moves away from >$100,000 more in profit
Today I was talking to a prospect who was considering accessing more capital. Totally get it. I’ve been there and have:
- Raised a $500,000 angel round
- Increased my corporate LOC to $250,0000 (secured)
- Borrowed >$250,000 on 3 separate occasions on 7-year repayment schedules.
I don’t believe I would have needed nearly as much access to capital if I had focused on profitability earlier. I didn’t realize that by saving $50,000 in a 20% EBITA company, I also didn’t need to sell $250,000 in future deals, and would remain at exactly the same profit levels.
In my call with the prospect we reviewed a few roles:
- VP Marketing
- Social Media Manager
- Content / Events Marketer
These 3 roles would be +$200,000 in North America, and $3,000 – $5,000 per month offshore. The savings alone in 1-year would create the following cascading waterfall:
- Raise profit margins by 2 full basis points.
- Create +$150,000 of pure profit going into Retained Earnings and Shareholder Equity
- Allow the company to leverage that Shareholder Equity to expand their LOC by 1.5x Retained Earnings, giving them $225,000 LOC.
It was an awakening. Only a few simple moves executed over 1-year can change the access to capital of the business.
Shed “expense pounds” will have you running 4-minute miles
A group of us have become competitive waterskiers in our 40’s. One of my friends dropped 20 lbs this year after a rash of injuries had sidelined his waterskiing goals, 3 years consecutively. He’s now “chasing buoys” in ways he hasn’t skied in years.
We all know the story. The 4-Minute mile was previously thought to be unbreakable. Then Roger Bannister broke it in 1954, and subsequently only 46 days later, an Australian runner broke it as well. Then the dominos fell.
Getting to where you want to go requires getting lean and mean. What that doesn’t mean is having to turn OFF roles, functions, etc. It means you need to look at what’s become a:
Anchor – cost centers that you know are holding you down. Non-productive assets.
Buoy – cost centers that just float there. If you didn’t tell the person what to do, they would just float there.
Wave – productive assets. Move independent of you. Create force. Become unstoppable. They cost MUCH LESS than then their productivity.
You’re going to have to switch up some anchors for waves.
What are a few extra pounds you can shed to start running your 4-minute mile?
Create a Hub & Spoke model to minimize potential communication challenges
I’ve had multiple CEO’s say to me “I really want to offshore my marketing team, or my customer support team, but I’m afraid of the internal communication barriers”. It’s a valid concern. You could build a team for the right price, producing great work, but an underlying current of communication nuances can sour the outsourcing experience.
To combat this, from my personal experience, we ensure that our team leaders “officers or captains” are as proficient with North American working culture as possible. It’s not about English proficiency. It’s about the details of North American work environments that aren’t documented in any Standard Operating Procedure.
As an example, Nazmul Ahmed is our fractional CMO at Pipeline Signals that quarterback everything. In this Zoom recording from last Thursday, we are reviewing social media posting best practices as a team. After this call, the social media team will work directly with Nazmul. I as the CEO coordinate directly with Nazmul, and Nazmul ensures my every idea and nuance is translated – even if he needs to explain little details in their native language Bengali.
As a Founder / CEO, you only need to develop and polish your communication nuances with the HUB and let the HUB focus on that same communication process with their spokes.
Don’t Forget – Benchmark your team against offshore talent.
- What is the profit increase you could expect?
- What is the sales relief / reprieve you could expect to generate the same profit?
Get ready to be shocked!