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Triple Overlap: Do you have the right approach towards Net Profit?

Net Profit. That elusive dream of every business-owner trying to create a sustainable legacy business.  

Welcome to our continuing series of “The Triple Overlap”. In case you missed our previous blog, read it here.

In this week’s blog we are going to talk about the first element of Triple Overlap – Net Profit.

This term probably rings a bell in your head. It might be the term you’re most familiar with as a business owner out of the three concepts. Probably because –  

  1. Taxes are given based on Net Profit
  2. The concept is easy to understand

But now we are going to cover it in detail and who knows? You might even find some surprising ways of looking at Net Profit – ways you may have never seen before.

What is Net Profit?

A simple google search will tell you that Net Profit is the measurement of a company’s profit once all the expenses, taxes, interest, and depreciation have been subtracted from its revenues. This term is often referred to as a company’s bottom line as well.

Even though most of the business owners know the meaning of Net Profit, they do not truly understand the meaning of it.

Nowadays, most business owners approach Net Profit as something they can control. Here is where they are wrong. In most cases, net profit is only whatever is “left over”. It is just a mere remains of the revenues after removing the expenses. It can only be calculated after a period of time has passed and by then, there is nothing that can be done about it!

But what can be controlled is the process of Net Profit.

Controlling the Process of Net Profit

The two components of Net Profit – Revenue and Expenses – are created by the activities that run in your business. The performance of these activities helps in creation of revenue and expenses.

Hence, it can be said that creation of Net Profit is a process. And because it is a process you can identify the specific activities and steps in the process that create the end result.
Then, just like any other process, you can alter the outcome by changing the activities in the process.

We’ve put together some useful (and tiny) changes you can make in your business operations that will have a significant impact on your net profit positively:

  1. The first interaction:
    Speaking over the phone, or sending out an email is often the first contact with a potential client of your business. The way your employees listen to a prospective lead has a huge impact on the quantity and quality of customers your business attracts. If you’re able to make your customer feel valued and cared for (regardless of the type of product or service you offer), it will lead to creation of more revenue with no increase in expense.
  2. Listening to your customers:
    Your customers – especially your regulars – will give you all sorts of feedback that will help you improve your business and products, only if you listen to them. Once you know what matters and what is best for your customers, you will have the potential to create a money-minting system that will change the fortune of your business – especially if you take the feedback into consideration while designing your customer journey.
  3. Increasing your repeating customers:
    Making sure your best customers come back is an important boost any organisation needs. As simple as it sounds, a lot of businesses face difficulty in regaining their customers, be it because they didn’t make that follow up call or send out an offer or notify them about a new product launch, these activities are hardly even considered by many businesses.

These are just three simple examples to boost your profits and improve your relations with your best buyers. They are meant to show you how you can control the activities that lead to your profit. Remember, you cannot directly manage and control net profit so stop thinking it as something you can control and instead start thinking of the changes you can bring about in the activities involved in the process of creating net profit.

Still need help in that?

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