How to Make More Profit in Your Business

Working hard but still not seeing the profits? You’re not alone. In this video, Steve shares how to boost your profit margins—without slashing costs or sacrificing quality.

He walks through the common mistakes that eat into profitability and reveals proven strategies top companies use to drive better margins. With real examples and practical advice, you’ll learn how to stop leaving money on the table and start making smarter, more profitable moves.

If you're ready to grow your bottom line and play to win, this one's for you.

TRANSCRIPT:

Are you building a business and it feels like you're not getting ahead? You're not making the progress you want to make? You're not achieving the goals you set out to achieve? Or when it comes to your profit, do you feel like it doesn't match the amount of blood, sweat, and tears you pour into your business just to make it run or to try to make it grow?

If you feel this way, trust me, I've been in this exact position and I'm going to share with you what I discovered along my journey and the three things that I did to radically transform my trajectory and to build a profitable business. So let's go ahead and jump in.

When I was writing my second book called Outsizing: Strategies to Grow Your Business, Profits and Potential, I discovered something really big. And I'm going to share that with you now.

At the time I was working in the construction industry and I had a lot of business owners come to me struggling with profitability. And I wondered if all these businesses ran by smart, ambitious entrepreneurs are struggling, how many other companies are in the same exact position?

So here's what I did. I started researching companies within the construction industry because I had a lot of proprietary data from working with all these businesses. And what I wanted to do was to figure out their economic profit, not accounting profit, because remember, accounting profit has a lot of ad backs, accruals and other items in there that don't necessarily represent the true economics of a business.

Sure, accounting profit is important from a compliance standpoint, and it's critical to represent your financial statements according to GAAP, Generally Accepted Accounting Principles, or IFRS if you're international, International Financial Reporting Standards. But this accounting profit presentation doesn't help business leaders to understand their true economic profits.

So here's the difference. If you take accounting profit and you make adjustments to account for working capital and capital expenditures, you'll ultimately arrive at economic profit. And this will show you what the business is actually earning.

Because remember, with working capital, there's a true cost to that that's not reflected on the income statement. The same thing is true when you invest in property, plant and equipment, also known as capital expenditures. Those capital expenditures don't show up on the income statement.

So as a business leader, you can be running your company and you can look at your accounting profit and think, wow, we're making all this money. But in reality, you have a lot of that money tied up in your working capital, or in other words, the difference between your current assets and your current liabilities. And also you have to use your profits to reinvest in capital expenditures.

So when you account for those things, you get a true picture of economic reality. And that's what I did in the construction industry.

So I looked at 363 companies of all different sizes, organizations that were doing a few million dollars in revenue, all the way up to several billion dollars in revenue. And I computed their economic profit. And then I sorted this list from the lowest economic profit to the highest economic profit.

And here on the chart, you'll see my work. I broke them into deciles. I took these 363 companies and I divided them into 10 different sections, starting from the lowest economic profit to the highest economic profit.

So that's what you're seeing here on the screen: deciles—decile one, two, three, starting from the left, moving over to the right to decile ten. This dark line represents their economic profit. And it may be hard to see, but there's this dotted line right here at zero, meaning these organizations are earning zero economic profit at the end of the day, after you account for working capital and capital expenditures.

In other words, they're just playing to play.

And what you'll see here is to the left, we have underperformers. These are the companies that are losing money. And then as we move to the right, the line slowly and gradually starts to increase. And this is where we have the higher performers.

All right, here's the interesting thing that I discovered along the way. Did you know that if we just took the top 20% of all the companies in this economic profit pool, that the top 20% of businesses earn 83% of the profits, which follows the Pareto principle?

So it's crazy that out of all these businesses, 20% of them are earning the majority of the profits. And what's even crazier is that the top 10% of companies are earning 64% of the profits.

And when I discovered this, I thought, wow, this is insane. The top 10% of businesses—or 36 companies out of 363 companies in this representative pool—are pretty much capturing all the profits. So what about everybody else?

As you'll see here, the majority of companies are earning zero. In other words, they're just playing to play. And that's what I was doing in my company. I was just playing to play.

I was waking up every day and I was relying on sheer grit and work ethic and heroics to try to achieve my financial goals. And as you can imagine, I was falling short.

So here I was busting my butt every single day, working so hard. And then at the end of the year, I'd have zero economic profit. But I didn't realize it at the time because I was showing accounting profits.

So I was tricking myself, believing that my business strategy was working. And when I discovered this, I thought, why would I go out there and work so hard every day just to play to play? And that's what I find the majority of businesses are doing.

So let me explain the 3 things that I did to overcome this problem.

First, I built a cohesive strategy.
If you don't have a solid strategy in place for your business, then you're doing what I did in the past. You're just getting up, you're working hard, and you're just relying on sheer grit and work ethic to achieve your goals. And I can tell you from experience, it doesn't work.

I made so many mistakes along the way, and I left so much money on the table. I mean, it's ridiculous, but it was a great learning experience.

So when you put in place a strategy—and I'm not talking about mission, vision, and values. Sure, that can be an important part of the strategy, but that's not a strategy. I'm also not talking about SWOT.

Doing a SWOT analysis where you identify your strengths, weaknesses, opportunities, and threats is not a strategy either.

Instead, I'm talking about a strategy based on a set of interrelated choices regarding your shared aspiration. In other words, what does winning look like, your market focus and position, your competitive behavior, and the resources and returns that will be required based on the strategic option to help you to overcome your strategic problem and to build competitive advantages and to foster innovation and to enhance the customer experience.

But when you have the set of interrelated choices, and then you go out there and you execute on this, that's when the magic starts to happen.

Most organizations believe they have a strategy, but it's not really a strategy. Oftentimes, it's just a plan. It's a laundry list of initiatives they'll pursue, but it's not a cohesive strategy that tells the company where they'll compete, how they'll compete, and ultimately how they will win.

So when I put in place a strategy for my business, I created clarity and alignment and accountability, and then everything changed because we started to achieve amazing results. But it all started with this strategy. So that's number one.

Number two, the second thing I did was I put in place the right infrastructure.
So when I work with organizations, the second step that I take after putting in place a strategy is ensuring they have the infrastructure to support execution. It comes down to structure and systems.

One day, I was on a walk by my house on this trail, and I was out in nature, and I saw this big old pine tree, and it was tipped over. And when I got up closer to it, I realized that it had this huge canopy, but then it was only supported by this tiny little root system. And I think that's a great metaphor for a lot of companies out there.

And that's where I was when I was struggling in my business. I didn't have the structure and the systems in place to support everything that was above ground.

So if you think about a tree, what's above ground should match what's below ground. The root system could be quite extensive, and you need that root system to support everything that's up above. And the same thing is true with organizations.

If you try to grow too quickly, but you don't have that strong root system to keep you grounded, or in other words, the infrastructure, the systems, and the structure, then ultimately you run the risk of failure.

So you don't want to go down that path because I went down that path, and it becomes chaos very quickly. So make sure you have the right infrastructure in place to support your strategy and to ensure your success.

And lastly, the third thing I did was invest in empowering high-performing teams.
Ultimately, you could have the best strategy in the world. You could have all the structure and the right systems in place. But if you don't have a team that is driven and high-performance, none of it will come about.

So when I started being intentional about building my teams, getting everybody aligned, instilling accountability, and measuring success along the way, then everything changed within my organization.

So these are the three things that I had put in place that made all the difference in the world and changed my trajectory.

If you want to learn more about this, if you want to put in place a strategy blueprint for your company, I have a free course for you at Coltivar.com. I'll provide the link down below, but be sure to check that out.

There's no gimmicks. There's no high-pressure sales call that follows this course. It's free because my goal is to help you to get to a million dollars in profit because that's when things become much more stable and scalable within your organization.

And if you're already at the million-dollar mark, congratulations. I want to help you to get beyond that. So be sure to check out that free course.

I'll walk you through all in much more detail. Is this making sense to you? If so, I'd love to hear your feedback. You can just type yes and put it in the comments box down below.

Also, if you have any feedback or you want to share what is your biggest struggle with strategy, I would love to hear that as well. Go ahead and drop that in the comments box and I'll be sure to respond to each and every one of the comments that you leave for me.

Thanks for joining me for this video.

And until next time, take care of yourself. Cheers.