Unlock Hidden Profit: Margin Secrets for Leaders

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Hey, welcome everyone to the Triple Margin Freedom Podcast.
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I'm your host today, Mark Mathai. I'm in studio at my home studio,
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and we're coming at you with a topic I think you'll find very important in your
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business and in your career, and that's simply margin.
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I just throw it out kind of generally like that because I think what we get
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wrong in business so many times is we don't manage margin well. And margin matters.
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And so in this podcast, I'm going to take the time and give you three ways that
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you can begin to improve margin in your organization today. You don't even have to wait.
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And you don't even need a coach, although that's highly recommended. Me, of course.
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To come in and help out. This is stuff you can begin with your team,
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with yourself, and within your organization to make sure that they're prepared
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and that they're taking advantage of making sure they have the routine of margin
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in place. First of all, what is margin, right?
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Well, when we think about margin, we think about the space in between things.
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So, of course, we're going to go through different kinds of margins, right?
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We have profit margin, which is typically where I start with,
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and I'll get into that a little bit more.
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We have time margin, which is how we utilize our time and how much space we
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give ourself to really be strategic.
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And then finally, we need to know, have this thing called strengths margin.
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And to be honest, I might make that up a little bit, but it's really important
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because margin happens when the team is flowing.
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So we'll get into all three of those, but real quick, hear me out.
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Early in October, the next Voyager framework is starting. If you haven't signed up.
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I just want to invite you to check it out. You can go to the website at voyagerleader.com,
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and look at the registration date. I think it's October 5th.
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We have another webinar coming up. Shortly after that, we're going to be starting
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a new cohort, probably mid-October.
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But what a great experience this has become.
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I mean, I love being surrounded by other like-minded leaders in different industries.
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So I get multidimensional thinking going on and so many new ideas.
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And I'm learning more about myself every time I go.
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So if you've been interested in a year-end development program
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that can help you be your very best, but not only that, help your team,
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help your organization, help everything you touch be its very best,
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then the Voyager framework is for you.
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You can visit the website at www.voyagerleader.com.
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Once again, it's VoyagerLeader.com.
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Okay, back to margin. So this thing called margin is a huge deal in businesses, okay?
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And I start with profit margin very intentionally. And here's why.
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This is something I know too well. See, I've led companies, I've scaled companies both up and down.
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And I can assure you the most important thing is the margin that you bring.
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So let's just hash this out. in terms of profit, first you have your top line
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revenue, your gross revenues. That's the amount of money that you bring in before
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any expense, any tax, anything is taking out of it.
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And that's an important number. Most organizations kind of stop there and they
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just continually get into a.
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And it's not a bad thing to increase gross revenues.
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The problem with just increasing gross revenue and not looking at the margin
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is that you can actually increase your gross revenue and lose money doing it.
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And that's a trap I want you to avoid at all costs.
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So how does it work? So you have your gross revenues coming in,
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and then you have what we call net revenues.
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Now, the difference between your gross and net revenues is the margin that you
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bring into the organization.
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Typically in service industries, what's the 12 to 20% net margin is a good number from your gross to net.
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But it varies depending on industry. And there's a lot of things that happen.
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But you really want to understand what that margin is.
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And one of the things I'm really passionate about coaching businesses for
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is that when you turn the margin engine around, meaning that for every dollar
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you're helping bring that organization more net margin, that's more profit for
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the owner, more profit for the company.
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And that eventually gets to be more profit and pay for every employee involved in the chain.
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As I've scaled companies and have experienced the impact of margin,
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I can assure you, the decisions you get to make when you have a healthy net margin line.
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Are way better than when you have none or small.
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And so you have to really guard the margin as you're going through this process.
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And so the first thing is, is you need to know the score, right?
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So in whatever you're building right now, the question I would have for you
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is simply this, how do you keep score?
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Do you wait till once a year or twice a year when your accountant reviews your
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numbers and says, hey, you're doing good or hey, you're doing bad?
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Or do you have some numbers that you target. In the operating system that I
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work with clients on, we look at profit and we look at that margin and capacity
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as one of the main factors.
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And there's simple ways that you can take small incremental steps and increase that dramatically.
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Now, it's not just increasing gross margin. As I said, you can sell a lot of
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unprofitable business and you will make a lot of nothing.
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Or you can sell a little profitable business and make plenty.
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And so I want us to focus on that net margin. And that's really what my system focuses on.
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So when I do a consult or work with an organization in terms of the organizational
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margin that we want to come in, I'll help owners kind of clarify what is the
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most pressing priority in the organization.
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I typically use a program called the Jumpstart 12, which are 12 essential areas
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of small business in any industry that need to be managed well,
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that need to be inspired, that need a little bit of your brain power.
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And if we work on those, we can almost guarantee a lot, like increased gross
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revenue, but more than that, increase the net margin, which is more profit back in the owner's pocket.
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Or the company's pocket, which eventually gets right back into the employees
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in terms of lower benefit costs, bonuses, more pay, opportunity,
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all kinds of really, really good things.
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I've heard this said this way, and I believe it. Profit is the domino that knocks
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over every other domino.
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Now, coming from a psychological standpoint, I know what it feels like when
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your company is not profitable.
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It hurts. It causes friction on your teams. It causes misalignment.
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It causes the same thing at home, doesn't it? You know, your wife or your husband
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isn't very happy if there's no profit, if there's no money coming in.
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And so that's something that we really need to contend with if we wanna be psychologically
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healthy in the great game of business. And so profit really does impact everything
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that we do. And so we do need to focus on it.
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And so there's simple things, simple triggers that you can come up with.
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But the very first question for the podcast sake is simply this, how do you keep score?
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What are you looking at? What levers do you pull to make what you have more successful?
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And that's why I always tell people that I can come into an organization and
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help you find between $10,000 and a million dollars instantly in hidden profit
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just sitting in your organization with small incremental change.
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Now, I'm not one of those consultants that comes in and blasts the organization
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because you can cut costs and you can improve that right away.
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But it also, cutting costs alone, puts you in a negative mind state and it's not a growth mind state.
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And the reason why that's important is when you're thinking constriction rather
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than expansion, you tend to think smaller.
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You tend not to take the risks and the competition will eventually eat you alive.
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So I don't start with cutting costs. We augment with that.
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And we don't start with big incremental changes. You know, I typically ask for 3% to 5% improvement.
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So if we're talking about a market-dominating position, for an example,
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just the way you position your firm and what's different about you,
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if you could just improve that 3%, it has a really dramatic effect on your overall sales.
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Now, you couple that with a 2% cutback in total expense, which is not much, right?
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Or a 1% or 2% price increase across the board, which is not much.
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People barely notice it.
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Then all of a sudden, you have exponentially impacted that margin level.
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And so we do that across 12 different areas and owners can sit back and with
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a little work and a little education, watch their profits soar.
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So step one is you have to know the score.
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You have to know why it's important so that you have the energy to actually do it.
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And then you have to move forward with a system. And that's the exact system
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that when I get to coach with people, I bring to the table.
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Now, step two, this is a personal one for me.
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Step two is less but better. Okay, that's a saying. You're like,
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what is that, Mark? Well, everyone who has ever scaled a business or has ever
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been in business or managed anybody understands that managing people can be
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one of the hardest things we do.
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And yet, and yet we continue to do it.
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But I like to say this as leaders, as executives, as nonprofit people that it's
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making amazing impact, we need to learn to do less, but better.
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Now, less means, yeah, we stop some of the grind. We make sure it's distributed
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throughout, you know, the team.
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And we focus on our highest and best use.
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The and better is the critical component of that. So what do you do that if
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you don't do it, no one else can do?
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That's probably one of those things that and better and you connect on.
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And so we need to get you into position where you're doing more and more and
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more of that. In the nonprofit sector, I see it all the time.
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I see great executive directors who are leading a successful nonprofit who are
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tremendous fundraisers.
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But what typically happens is because we're in a people business,
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whether it's nonprofit or for-profit, but we get lost in operations.
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And so if you don't have strong operational support and that leader gets lost
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in operations, all of a sudden that leader's time is spent
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doing things like formatting websites, building campaigns, working on marketing,
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all of this stuff rather than what they're great at, which is building connections,
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bragging about their non-profit, and raising funds.
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So the first thing we do is we talk about less but better so that we put them
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in position to be able to get out there and do the funding that's necessary
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for the organization to thrive.
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Now, not every executive director has that particular strength.
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I get that. But whatever that strength is, I guarantee you if they had more
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time in that spot, their mission would be impacted positively.
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Same thing on the for-profit side. We each have different strengths and talents.
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And so by understanding the difference between the work you just have to do
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because you have to do it And the work that you're really genius at,
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the stuff that, man, when
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no one else does it well like you, knowing the difference between those and
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then placing yourself in the path of most potential is actually one of the secrets
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to having a successful, long-term, profitable business.
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Okay, so what's the one thing you do so well that your organization can't replace you?
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It's a great question, isn't it? Why don't you answer it? Let me know what it is.
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Okay, step three, you need to know your strengths. Man, I could get on top of
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this house and scream it to the world.
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You really do need to know your strengths. Now, your strengths,
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and I use CliftonStrengths as a tool I use, but there's others out there and
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I'm not promoting one over the other, even though I think CliftonStrength is
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the most accessible, reliable, accurate, and cheapest.
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That's just my thought. But you need to know your strengths in order to start
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to move on your strategy.
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You know, when you begin to know your strengths the way you naturally think, feel, and behave,
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and you allow yourself to show up with your shoulders back, confident in who
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you are, not trying to fake it till you make it, but authentically you,
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this is how you lead from your authentic core, your strengths.
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Then all of a sudden what tends to happen is your engagement level internally
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goes up or your interest in what you're working on goes up. Why?
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Because you're doing it in a way that relates to you quite well.
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But what is not often talked about is that every single one of us has different strengths.
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And so if you're leading a team and you want to get into the strengths movement
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and you stop it yourself and you get into your strengths and you expect everybody
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else to have your strengths, well, then all of a sudden you lack diversity on
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that team and you're going to shortchange your potential.
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And so strengths is important because we know what's best in us and we recognize
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that everybody else has something different that's best in them.
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And that's a really important point because when you become a strength spotter
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in others, then you can begin to position the team and put each person,
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each piece of the puzzle in the place of greatest potential.
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Now, just think about that in your immediate team right now.
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What if you all took the role, your primary role, in the place of greatest potential?
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And then you delegated out some of the grind work so y'all get a little bit of that.
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And then the great stuff, the stuff you're really good at but isn't quite as
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impactful as the stuff you're genius at, then you kind of share those tasks.
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Well, all of a sudden you begin to shift the organization and customize it around
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the talents and strengths of your team.
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A side benefit to that, too, is you open up a new communication channel that
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everybody has a new language. It's no longer Mark did it this way or Mark is too impatient.
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It's boy, Mark's activator is off the rails. And you could even approach me
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about that. And I'd say, you know, you're right. I need to turn it down a little bit.
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So knowing your strengths is one of those critical things that can help teams
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bond and form a layer of communication that most organizations never get.
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I believe that's the key. That's the reason why when you have a strength-based
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team, you see the positive statistical results in that team.
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It's because they're speaking a new language. It's curated amongst the member.
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They stop looking at what's wrong in each other, and they've started really
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focusing on what's right.
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And then they even get to a point where they start to call out what's right in each other.
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And that's when you know that your team is about ready to soar.
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Friends, I'm not saying it's all about margin. I'm just saying that in business, it's all about margin.
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And so we have to work on our margin, whether it's our profit and the margin
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that we're bringing in and the better the margin, the more successful we're
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going to be long-term for everybody involved.
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Whether it's understanding how to build margin in what we do every day,
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the less but better principle, our path to enlightenment, right?
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That's organizational enlightenment.
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Or knowing your strengths in order to elevate your thinking and potential by
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working more in your zone of genius rather than the areas you're just good at.
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You share the grind across. We're always going to have that.
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But man, the more time we can spend in our zone of genius, the more impact over
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the long term that each and every one of us can have. So three simple steps.
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Know your score. What is your score? How will you keep score?
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Step two, think about less but better.
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What is that for you? What is less but better for you?
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And step three, what about your strengths? And do you have a system in place
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to help the entire organization focus on what's right in each other so that
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you're building aligned, cohesive teams that can drive results even when you're not in the room?
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Friends, what I've just outlined is really the secret path to triple margin
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freedom, which is what this podcast is named and
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which is what the gift is that I wanna give every business leader,
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every owner, every nonprofit executive who's out there every day working hard to make a difference.
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If you've liked this episode, please like, please subscribe, send me a message.
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And until we talk again, I like to close every one of my podcasts this way.
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No matter what you're doing, no matter when you're doing it,
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just remember to elevate your moment.