How to Maintain Profitability in a Changing Market

I came across an article discussing How to Maintain Profitability in a Changing Market. Here are a few snippets that you might find interesting.

Starting a?business?and making it break even is an extremely difficult accomplishment. Kudos to?entrepreneurs?managing this feat. But running a business is also no cakewalk. No profitable niche lasts forever, and the more profitable it is, the slimmer?the chances are that it will last. Many entrepreneurs, including those with seemingly safe businesses, lost everything when their industries were unexpectedly disrupted.?

In other words, your business is not safe even if you are already making nice profits and the future looks bright. After all, even protected monopolies eventually get disrupted. What you need is to make sure you can stay profitable in the years and decades to come.

Profitability is to meet the future?

The key to profitability is to recognise what businesses are and do from the perspective of the whole?economy. Businesses formulate strategies to position themselves with respect to each other and thereby earn profits. So the economic context matters, because it is within the economy that you run your business. It’s an obvious point, but what it means is rarely considered.

In the startup phase, the entrepreneur tries to find and populate a “gap” that allows the business to become profitable. But the same is true for the existing business, which must continue to consider its positioning to stay profitable. That’s what the old-style “Five Forces” framework helps you do — to position your business so that competitors, suppliers,?customers?and others have as little sway over it as possible. But there is more to it than positioning.

Profits are rewards for a job well-done. But to maintain profitability, your sight must be set to facilitate future value. After all, the line of production that you’re considering today will not be instantaneously available to your customers. The value they get from the goods and services you set out to produce will without exception happen in the future. In other words, profits indicate you did something right. But profitability is a matter of meeting the future.?

This subtle point has important implications. Businesses that produce the final product must focus on what consumers want and, more importantly, what they will want in the near future. But the same applies for B2B to maintain profitability. If you produce for other businesses, the viability of your own business goes only as far as your customer’s. When they are no longer profitable, you are no longer profitable.?

To stay profitable over time, look beyond your customer and consider your contribution to the value of the final product. Even if your customer does not recognise it, you should meet the opportunity and innovate to offer your customer an upper hand. If you make your customers thrive, your business thrives. The key is to think about the consumer whether or not you serve them directly.

Whether or not your business caters directly to consumers, it should still be consumer-oriented. To gain and maintain relevance in the economy, which is necessary to be (and continue being) profitable, requires that you contribute to the value of the final good. The great mistake of the taxicab companies was to focus on their strategic positioning in the market over innovating to facilitate value for consumers. This left the market wide open for a new type of competitor playing by a different rulebook.

All businesses benefit from adopting a consumer-value focus.

Want to know more? Head on over to the full article here for more ideas and perspective. Afterwards, why not drop me an email to share your thoughts at [email protected]; or call me on 0467 749 378.

Thanks,

Robert