The Path to Profit

This is the underlying question that drives everything we do at Profit Noodle. Whether we are writing about marketing or operations, the idea that business activities should help businesses achieve profit is at the core. Even when we write about more “soft” topics like sustainability of inclusivity, there is still a fundamental belief that value-based business has a certain ‘positive karma’ that helps boost profitability.

If the business can’t be profitable, why even be in business at all?

Generally, businesses struggling to find profitability fall into two major buckets:

  1. Businesses Struggling to Generate Revenues: This bucket is mostly full of startups that haven’t yet cracked the nut on how to generate sales and create top line income for the business. This could also include established businesses that have seen major declines in sales or wide-scale customer defection. In either case, the primary bottleneck a business needs to address in this bucket is chiefly related to drumming up new sales opportunities.
  2. Businesses Struggling to Convert Revenues to Profits: This bucket is for established businesses of any size that are being eaten out from the core by rising costs, burgeoning expenses, and changing market conditions. In many cases, an established business may even have been long propped up by bank debt and never had profitability. In this bucket, bottlenecks could be related to any number of systems that have a higher operating cost than their throughput.
Two Buckets. Bucket 1 - Businesses Struggling to Generate Revenues. Bucket 2 - Businesses Struggling to Convert Revenues to Profits.

Whichever bucket a business is in, it can seem insurmountable. How can a business with no sales suddenly create sales? How can a business that is haemorrhaging possibly stop the bleeding? There is one single factor that is necessary for any business seeking to find the Path to Profit.

The #1 Determiner of Profitability

There’s a reason this blog is called Profit Noodle…. You have to use your noodle. If you’re not willing to honestly and critically think through the challenges facing your business, profitability is all but guaranteed to elude you.

Your mind is the single most complex force that science has been able to study. Barring God, the possibility of extraterrestrial intelligence, and the far frontiers of theoretical mathematics, there is nothing that comes close to rivaling the creative complexity of the human mind. Even artificial intelligence, which exceeds human capacity in many domains, still lacks the ability of higher thought. The Blue Brain Project based in Sweden has even used models based on algebraic topology that would suggest the human mind functions in 11 (or more) dimensions.

However, I see all too many brilliant folks running around thinking they aren’t that smart. Most people radically underestimate their mental capacity to grow and work through challenges. I truly believe nearly everyone has the potential for incredible thoughts. How many of humanity’s greatest achievements can be credited to those with profound mental disabilities and circumstantial challenges? Countless.

Ironically, those people with massively inflated egos who believe they know everything have everything in common with those people who think they are too lacking in intelligence to rise above hardship and accomplish anything meaningful. Both believe that they can’t learn. Both are unwilling to receive feedback from other people. Both are raging narcissists.

A Venn Diagram of 2 Circles. Circle 1 - People With Inflated Egos. Circle 2 - People Who Feel Stupid. The area where the circles overlap reads: "People who believe they can't learn."

Now you might read that and immediately be reminded of some distant alcoholic family member or a particularly annoying colleague. But, in truth, all of us drift toward either end of the “capacity to learn” spectrum. If you intend to walk the Path to Profit you must commit yourself each day to relentless curiosity. You must kill your ego, because you can always improve.

Why the Path to Profit is Different

There are many useful business frameworks out there. What sets the Path to Profit apart is that it unifies business formation, sales, operations, and finance into a simple and replicable format. These 5 simple steps can be applied to any industry, anywhere, any time. Whether you are selling popsicles in Iceland or cutting-edge cybersecurity solutions to the military, the Path to Profit provides context to the chain of business activities that take you from an idea to having a formula that reliably creates profit in your business.

The 5 Steps

The 5 steps on the Path to Profit are simple and intuitive. That doesn’t mean they are easy. Having a compass doesn’t mean you won’t sweat and struggle as you hike through the mountains. But that compass gives you a fighting chance to get where you want to go. Hold these principles close like it is your map in a dark, cold, and lonely forest. Memorize them and operate your business by them:

  1. Identify Message-to-Market Match
  2. Create the Product / Service Mix
  3. Build Sales Collateral
  4. Implement Back-End Systems
  5. Sell Harder
A diagram of the 5 steps:
Identify Message-to-Market Match

Create the Product / Service Mix

Build Sales Collateral

Implement Back-End Systems

Sell Harder

Step 1: Identify Message-to-Market Match

Identifying the Message-to-Market match means discovering both the ideal customer base for your business as well as a “story” that connects with that customer base on a visceral level. This takes a delicate balance between the art of storytelling and the hard science of market research.

In his book Start With Why, Simon Sinek writes, “There are only two ways to influence human behavior: you can manipulate it or you can inspire it.” Many businesses opt for the former. Don’t get me wrong, manipulation does work. But, if you neglect to build that core foundation, your business will lack the single most significant resource you could ever give it.

There is a reason that this comes before even creating your products and services. When you know for certain the reason that you are doing business, that energy will carry over into the way you build your products, marketing, systems, and ultimately into the way you conduct your day-to-day sales and fulfilment activities.

In the process of identifying your Message-to-Market match, there are 3 main boxes you must check:

  • What is the underlying “Why” of your business? Begin with identifying the “essence” that is at the core of what you are trying to build. This will inform every other initiative you take in your business.
  • Who is the dream customer for this Why? Create an avatar that represents their needs, desires, demographics, and challenges.
  • What is the Total Addressable Market (TAM)? This is where you use objective research to test your intuitions.

Like every step in this process, Step 1 is something that you can always revisit. Nothing is ever set in stone forever on the Path to Profit. You can revisit a previous step with fresh eyes and the hard won maturity of experience. If you have an established business where you are already selling hard and have built out systems, revisiting this exact step may be the precise change that propels your growth.

Step 2: Create the Product / Service Mix

Once you have identified the Message-to-Market core values for your business, you can use that to influence the way that you develop your products and services. Lots of businesses dump resources into trying to advertise sub-tier products. However, the single most valuable advertisement your business will ever have is the quality of your products and services. Quality will ultimately make or break your reputation in business. The way you sell, serve, and deliver all matter a lot. But quality is what separates a company that can just sell well from a market-defining business.

Now that you understand the value system driving your business in the market, you can structure your products and services as a vehicle for delivering that value. Whether you are making a tangible widget, a service deliverable, software, information products, or even reselling someone else’s product, you can use the all-encompassing message of your business to inform the way you design its deliverables.

If you are struggling to build out your product & service offerings, try thinking of it like a formula. “We provide [Message/Value] to [Market] through the following products and services.” Then just list out as many ideas you can think of. Once you have worked up a solid list, try to identify the choices that naturally jump out as the kinds of valuable products and services your market will pay for. It’s not a perfect science. Even if you run focus groups or surveys, you still can’t guarantee a product or service won’t utterly flop when faced with real market pressures. But approaching this challenge with the goal Message-to-Market match will give you far greater odds of landing on a compelling offer.

Once you have settled on the product and service offerings you will develop, there are two main ways that you can go about making your products high quality:

  1. Pour time into making the core offer as good as you can possibly make it. Spend serious time on design, research, and development.
  2. Boost the perceived value of your offer by building auxiliary value-adds in the form of bonuses, guarantees, extended services and other “value-adds”.

I don’t want you to get hung up on “perfecting” your product/service mix. Perfect is the enemy of good. Do, however, spend as much time as you can possibly afford on finding ways to improve your product/service mix. Do look for new ways you can expand your product/service mix and try new and complimentary things so that you are not overly dependent on one single offer or trying in vain to fix an offer the market doesn’t really want.

You don’t want to spend all your time building stuff that no one may even buy, but you also don’t want to rush through this step and neglect to make your products and services actually good.

You probably won’t land on the money the first time you bring an offer to market. But, if you can learn how to develop quality offers, your reputation in the market will grow and your odds of success increase exponentially.

Step 3: Build Sales Collateral

By sales collateral, I mean the documentation, tangible resources, marketing, scripts, and brand presence that help you sell a product. This can take many forms—websites, sales funnels, business cards, brochures, sales scripts, etc. While the gift of gab can sell a product, sales collateral will lend you credibility and grease the wheels. As someone who isn’t naturally comfortable with 1-to-1 interactions, sales collateral has been critical to my ability to sell high volumes.

A graphic showing different types of sales collateral. Branding collateral includes websites, blog posts, logos, brand kits, and thought leadership. Marketing collateral includes funnels, flyers, advertising, business cards, and whitepapers. Sales support collateral includes protocols & forms, scripts, consulting resources, datasheets, and sales decks.

I found early success in business in my 20s mainly because of my ability to create quality sales collateral. Funny enough, I remember when I was in 10th grade, a family friend said to me “no one will ever pay you to draw” when I showed him a sketch I did in school. However, my eye for design played a major role in my ability to quickly garner respect for my business development skillset.

Of course, it isn’t design alone that makes sales collateral good. You need to develop an understanding of the kind of copywriting that makes people tick. You need to have an eye for professional design. You don’t have to be a design wizard or master copywriter, but one way or another, you need to get your hands on the sales collateral that your business needs.

One option that I recommend is outsourcing some of your design needs to freelancers. Even if you leverage freelancers, be sure to constantly challenge yourself to grow your design and copywriting skills. Apps like Canva have made professional collateral design accessible to everyone and there is no excuse (unless you are blind) to not begin refining your design skills.

As you grow your business constantly expand and improve the sales collateral you are using to help push your products. Business development through resource design should be a core activity as it allows you to bottle your efforts and let them compound. Every time you create a new flyer, try a new script, or write a new bit of content, you are expanding the tools you have available to help you sell.

Step 4: Implement Back-End Systems

You deserve a pat on the back. At this point you have spent a lot of time clarifying your values, crafting your products, and figuring out how to sell them. The first three steps should have at the very least gotten you out of the “Struggling to Generate Revenues Bucket.” Now, in order to maximize profitability, there are two big reasons you must implement back-end systems.

First, implementing systems gives you a scalable foundation. In order to serve more customers, hire more heads, and expand your service offering, you will require more infrastructure to support your business.

Second, implementing systems helps you plug the holes that keep you from delivering the highest levels of service to your customers. I remember when I got started in technology sales, my team would sell hard to drum up new opportunities. However, due to disorganization and the daily chaos of trying to fill complex orders, we would lose more than half of the sales our customers were willing to pay us for.

This is why you need robust systems in your business.

A graphic showing the three types of back-end systems. Financial systems, CRM systems, and delivery systems.

There are 3 main types of systems that you need to implement in your business:

  1. Financial Systems
  2. CRM Systems
  3. Delivery Systems

Financial Systems include having a solid back-end accounting framework. It also includes the systems that you use to process customer transactions. This begins with developing financial literacy and getting your business to generate essential reports—most especially the Profit & Loss (aka Income Statement) report.

I’ve devoted a large chunk of this blog to helping businesses and entrepreneurs figure out how to go all the way from starting up low-overhead financial systems all the way to building out complex financial mechanisms that can become an engine for growth.

CRM Systems are where you keep your customer data. This is so much more than just a list of customers though. Your CRM becomes the central vehicle by which you drive sales. Inside a well-built CRM system, you can track your sales through various stages in the pipeline, run strategically mapped out sales and marketing campaigns, generate reports that help you make data-driven decisions to boost the results of your sales efforts, and provide far better levels of customer service.

I’m particularly devoted fan of the HubSpot CRM, although SalesForce is definitely the entrenched market leader for CRM software. The Profit Noodle blog originally started by sharing tips for the HubSpot CRM and we have a big library of content on how to make this system a daily driver for your business.

Delivery Systems are the mechanisms by which you actually deliver your service. This can include everything from project management systems like Basecamp and Asana all the way up to robust logistics systems for handling shipments to a wide customer base. In short, any system that you use to deliver your products and services should be viewed as a critical resource for your business and optimized to maximize the speed, quality, and cost efficiency of your customer fulfillment efforts.

Together, each of these three systems will help you drive sales and maximize profits for your business. When you figure out how to get them integrated and sharing data, your business will truly be firing on all cylinders.

Step 5: Sell Harder

Many businesses sell aggressively from month to month only to see a big fat red loss at the end of the quarter. This is because they only focus on the top of their funnel and lack appreciation for the importance of how a unified and optimized system for value delivery. It is like going hunting but finding out the meat is rotten once you thought you had finally landed a meal.

But you know better.

You have clarified the values of your business and synthesized them into a compelling Message-to-Market match. You have spent hard-won time building out your product/service mix and making it the best in the market. You have thoughtfully crafted your sales collateral to express the value of your offer to your clients. You have built strong financial, sales, and fulfillment systems to help you efficiently and intelligently deliver your offer.

You are finally equipped to reap the rewards of your efforts, now that you understand how all the pieces fit together to build a business that generates consistent big profits.  Now you can go hunting to onboard new customers and actually eat what you kill.

Because you have a big picture view of your business, you will have discovered that sales isn’t just about making more calls or running more ads. You will have learned that what you do in any part of your business will affect every part of your business.

You can now improve the core of your sales efforts through:

  • Tweaking the message
  • Refining the products
  • Growing the collateral
  • Optimizing the systems

As you begin to sell harder and grow your business, you will likely also begin to hire more employees to help assist you in your efforts to scale. It is at this stage that you will learn management and leadership by browbeating simply isn’t effective.

A graphic showing the differences between autocratic management and empowering management. Autocratic management is a style where you yell more and pay more to retain employees, value is placed on obedience, results are driven by fear, and there is a culture of chaos. Empowering management is a style where the team buys into the vision, value is placed on innovation, results are driven by love, and there is a culture of community.

You will begin to empower your team to sell harder by sharing the vision with them and training them with the skills to plug the holes and seize the opportunities that make your business a stronger value-delivery (read, sales) machine. You will foster a mutual respect and create a culture that encourages innovation and autonomy.

This will make you unstoppable.

It All Fits Together

Every single business activity you will take can be mapped somewhere along this 5 step framework. In fact, I highly encourage actively mapping out your business model and strategy on paper based on this framework. Look at everything you are doing in your business and see where it would fit within this system.

This Path to Profit is the foundation for everything you will find on Profit Noodle and it is my sincere hope that this blog helps make everything fit together in your business. Thank you for taking the time to read my thoughts and experiences on profitability and I promise I will always do everything in my power to help you grow.