What Is Your Company’s Core Business?
“Focus on the core problem your business solves & put out lots of content & enthusiasm, & ideas about how to solve that problem.” Laura Fitton
No matter what growth strategy you choose, your company’s infrastructure must be able to support its successful execution. Devising the strategy and implementing it are two very different things. One without the other can be devastating.
Revenue versus Profit Growth
Many organizations depend on revenue growth to determine the scale of the business. The real determinant of growth is creating long-term profitability through efficient operations.
More revenue from sales does not always mean more profit. Revenue is only part of the equation. Revenue minus expenses equals profit. It is true a business must keep their costs as low as possible to make sure it is maximizing its profits. The real question is how does a company maximize its profits?
The key is to answer some very important questions about your business relative to your industry. Some of these questions are as follows:
What is the state of your industry relative to the overall economy?
How big is your market opportunity and how fast is it growing?
Is your business privately owned or funded by venture capital in return for an equity share of your organization?
Was your enterprise the first supplier in the marketplace?
Does your firm have intellectual property such as patents, trademarks or substantial product complexity to protect your market position?
Do you have a competitive advantage in the industry that you can increase over time?
The answers to these questions require focusing on your company’s core business.
Core Business Definition
Your core business is defined as the products, services, customers, distribution channels and geographic areas that yield the highest return on your investment (ROI).
It is critical that systems be in place to measure the overall performance of each segment of your core business. Peter Drucker, the world-renowned business consultant, said: “you cannot grow what you cannot measure.”
Business Growth Assessment
The best place to start the assessment of your core business performance is with the following five questions:
Who are our core customers?
What is our firm’s main competitive advantage and how can it be strengthened?
What are the most attractive growth opportunities given our core business?
Which performance measurements should we use?
In what direction are key performance indicators going and why?
The answers to the above questions must include input from your employees, customers, senior management and external stakeholders such as vendors and strategic partners. Be sure to include both loyal and not-so-loyal customers in your research.
The probability of fulfilling your profit and growth objectives is significantly increased when your organization has a clear and well-defined growth strategy combined with a strong execution infrastructure emanating from your core business operations.
Please visit Lyon Wealth Management, Inc. for more information on many other planning topics.
Lyon Wealth Management, Inc. is a team of investment professionals registered with HighTower Securities, LLC, member FINRA, MSRB and SIPC & HighTower Advisors, LLC a registered investment advisor with the SEC. All securities are offered through HighTower Securities, LLC and advisory services are offered through HighTower Advisors, LLC. This is not an offer to buy or sell securities. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. In preparing these materials, we have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public and internal sources. HighTower shall not in any way be liable for claims and make no expressed or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in or omissions from them. This document was created for informational purposes only; the opinions expressed are solely those of the author and do not represent those of HighTower Advisors, LLC or any of its affiliates. HighTower Advisors do not provide tax or legal advice. This material was not intended or written to be used or presented to any entity as tax advice or tax information. Tax laws vary based on the client’s individual circumstances and can change at any time without notice.