“Profits and cash flow in a business
are like blood and water in a person’s body.”
This is something I often tell my clients and students. Just as a person needs blood and water to survive, a business needs profit and cash flow to survive. It’s not new. You’ve probably heard the business adage: “A business must run at a profit or it will die.” I use the blood and water metaphor to emphasize the point. It’s absolutely essential!
There is no other way to earn a return on capital invested in the business? There is no other way to meet payroll expenses? There is no other way to pay your suppliers? A business needs profit and cash flow to survive. Period.
Yet, setting your business goals solely around making a profit and having a healthy cash flow is seldom (if ever) the way to achieve either of these things. The profits earned by business are a result of providing a product or service to customers that’s good enough for them to give a business their hard-earned money for providing it. And they are most often the outcome of delivering a more desirable mix of tangible and intangible values to customers than the competition.
Peter F. Drucker, one of the most influential thinkers and writers on the subject of management theory and practice in the past fifty years, insightfully observed,
“The purpose of a business is to create and keep a customer.”
Profits, he asserted, are merely the consequence of achieving this goal. I couldn’t agree more. Profits accrue to a business when it wins with customers.
Companies need to focus on delivering value—on doing a better job at improving people’s lives—if they are going to be, or continue to be, successful into the future.
History has shown that a business succeeds in creating loyal customers when its brand is associated with compelling value. Compelling value is delivered when the solution the brand is providing, through its mix of functional, experiential and emotional benefits, (tangible and intangible values) is perceived by its customers to be improving their lives in a relevant and unique manner.
The most successful global brand leaders know the key to building strong brands and businesses. They start with Rule #1.
Rule #1: Brands exist to improve lives!
If you are trying to build your brand and business and this isn’t your primary focus, you might ask yourself why.
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