MBA2340 Must Read: The Art of Profitability by Adrian Slywotzky

0:08Heyo! Welcome to the$100 MBA show, practical business lessons you can count on. I'm your host, your coach, your teacher, Omar Zinhome. I'm also the co-founder of Webinar Ninja, an independent software company I started back in 2014. And today's episode is a must-read episode where I share with you a book that has influenced me as an entrepreneur. I share with you its takeaways, its insights, and why you should read it too. Today's must-read is The Art of Profitability by Adrian Slowowski. This book, The Art of Profitability, is without a shadow of a doubt, 100 % certified must-read. because it drills home some really important things to have a successful business.

0:48Like why profitability is so important if it's not obvious enough, how to keep profitability front of mind in your business, a bunch of ways to be more profitable in your business and real life examples from real companies showing how to implement these strategies to be more profitable. Listen, cashflow, profitability, money is the oxygen of your business. You're gonna learn either the easy way or the hard way, most people learn the hard way where they basically lose oxygen, right? They're out of money and they're struggling to make their business go and make their business stay afloat. Or you can learn the easy way and listen to this episode and read this book.

1:27So let's get into it. Let's get down to business. The Art of Profitability is a book that stresses the importance of profitability, but also the constraints. Right off the top, it lets you know that, hey, there are many ways you can make your business more profitable. But it's unlikely your business will be able to do all of them. Probably going to be able to do one or two or three. He also stresses that most people don't really prioritize profitability. They say that, they think that maybe on a high level, but in practice, they're not looking at their P &L and making sure that there's an excess of cash that they're making every single month.

2:01They're more interested in growing their company, in more customers, in higher revenue, regardless of costs. And you even hear in the language when people want to show off a little bit about their business. They talk about how many employees they have. They talk about how much revenue they made or sales, how many users they have on their app. They don't ever talk about or at least they don't open up with, hey, my business is 90 % profitable. That's something to brag about. So this book really stresses, don't worry about all this other stuff, all these vanity metrics that people show off with. Employee count and user count and all that kind of stuff and followers.

2:33That's all smoke, right? All that really matters for a successful business is profitability, how much money you actually make at the end of the month, at the end of the year. Yeah, I know that big tech companies love growth and you're VC funded. They're always pushing for growth and we can be profitable later. But guys, those companies are a fraction of all businesses out there. Most of us that are listening and part of this community don't have millions of dollars in funding. And therefore, it's even more important for us to be profitable to have a valuable company. Think about it. When somebody buys a company, if you were to buy a company right now, what's the number one thing you're going to want to know?

3:13How much money does it make? What are the expenses? What is the profitability? You want to know if this thing is going to be putting money in your pocket. So after we have established and know without a shadow of a doubt that profitability is the top priority in any business, how do we have profitability? What are the ways we can be more profitable in our business? And that's really what most of the book is about. Now, there is a kind of word of caution that it's easy to brainstorm different ways to be profitable. The execution part is what's difficult. So, mind you, this is just the first part, like kind of identifying how you can be more profitable.

3:45Now, how to execute that in your business, implement that in your business, that's where it's going to be a challenge. Now, when you're exploring all these different ways to be profitable, one of the things that Adrian really emphasizes in this book is do your own math. Okay? I can't tell you how important this is. I've done this so many times and every time I do it, I'm just shocked how simple it is, but at the same time, how often I don't do this often enough, right? And it's just a simple spreadsheet, a Google sheet, whatever you want to use, where you plug in the numbers and see, you project how profitable will you be with this business model, with this profitability strategy.

4:20It's just easier to make a decision when you see the numbers in black and white, and you'll see what I'm talking about in a moment. The first strategy to be more profitable is one called a customer solution profit. This is having a offer or giving your customers such a brilliant experience, exactly what they need. At the heart of it, it's knowing your customers so well, you make the perfect product for them. For example, let's say you opened a restaurant and you know that the customers that will frequent your restaurant are very health conscious. They're fitness fanatics. Knowing that you are creating the perfect menu for them.

4:55The menu has all the nutritional facts on there, the calorie count, the macros. For somebody who's not health conscious, you're not for them. They actually probably would not enjoy your restaurant at all. But for those who are, you are perfect. You're exactly what they're looking for. You're making it easy to dine out for them. So it's easy to actually charge more for this type of experience and be more profitable because you created the perfect experience for the perfect person. They can't find this experience somewhere else, or at least it's not local. You just nailed it on the head so they're willing to pay.

5:30Many of us have these experiences, okay? Many of us will pay a premium for exactly what we want. Another way to be more profitable is a strategy called the pyramid profit. This is recognizing the fact that you have competitors and competitors are probably gonna try to undercut you in price. So instead of trying to charge less for your premium products so you can compete on price, you create a bunch of products at different price points. So therefore, you can cater to price without shortchanging yourself and charging less for your more luxurious products, more premium products, more high value products.

6:07A good example of this is a car manufacturer like Toyota. Toyota might have a very, very entry level cheap car like a Yaris or something or a Toyota Echo. But then you move up the ladder, move up the pyramid in this case, and they charge more and more for the car. Then you have a Corolla, then you have a Corolla Cross, and then you have a Camry, and then a RAV4, and you go up and up and up, and it gets more and more expensive. But the point here is that your customers now have options, and you don't cheapen your expensive products by lowering your price. This is a brilliant concept that we all should adopt in our businesses, especially if you're in the information business.

6:48If you are a coach or you're a course creator, you're somebody who teaches for a living. Just having your premium, you know,$30 ,000 a year for coaching product, that is the luxury car. You do not want to just offer that. You want to create a pyramid where you have maybe a lower entry product like a book and then maybe a five-day challenge. That's a little bit more expensive. And then a standalone course, then a short-term coaching program, whatever it is. The point is that move up the pyramid. And instead of trying to cheapen or lowering or discounting your expensive stuff or higher price stuff, what you want to do here is offer things at different price points.

7:30Another example of making more profit in another way is what's called multi-component profit. Think of a bottle of water. You could buy a bottle of water at the supermarket for maybe less than a dollar. But the same bottle of water at a vending machine at your office is$2. At a convenience store, it might be$3. On an airplane, it might be$5 or more. In the airport, it's a different price. It's the same bottle of water. Why the different prices? Well, the circumstance is different. The location is different. And therefore, the need is different or it's higher. If you're thirsty and you're on a plane and there's nowhere to go, you have no options, you're going to pay whatever they're going to say.

8:07to quench your thirst, even if it's marked up 5 or 10x. The need for it is greater. So think of your own business. Where would your customers need your product more or feel the urgency to buy more or will value your product more, whether it's a place or a circumstance? For example, if I sell luxury beanies, I'll be willing to pay more money for this beanie in a little shop, in a hotel, in a ski resort because I'm cold now, right? I lost my beanie on the ski lift and I'm not going to go and order one on Amazon right now and wait a couple of days. I'm going to hit the slopes tomorrow morning. So getting into that shop in a hotel, in a ski lodge or in a ski area gives you leverage, right?

8:49You can charge more and be more profitable. Time profit is another way to be profitable. And Amazon is the king of this right now. What's time profit? Well, you're just doing it faster than anybody else, whether it's delivery in the case of Amazon, but you could be a service and you will get the job done faster than the competitor and therefore you'll pay more. So for example, let's say your refrigerator is broken down and it's a Sunday morning. If you want your refrigerator to be fixed in the next few hours, you are willing to pay more because other people are gonna make you wait until Monday.

9:24Maybe they gotta get the parts, it might take a few days. So speed and saving time has value. So you can offer your products and be more profitable in those situations. He has a profit multiplier model as well, which is like an online course. You create it once and you sell it over and over and over again. This is similar to the movie industry. You know, Disney makes a movie. They dump a lot of money and effort into it. And then they sell it and distribute it and sell it to streaming companies over and over again. This allows you to scale your profit and make money. You pay once for the extra production and your cost per distribution is very, very minimal.

10:02And there's more and more ways to be more profitable in the book. I'm going to let you read it. I want to give you a tip. If you're going to get this book, get this book in paperback and take notes, okay? Have a notebook or even take notes in the margins of the book. It's your book. Every time something's suggested, think of different ways you can implement this in your own business, with your own products, with your own services. Do the brainstorming as you're reading so that when you're done, you can just go and implement. That was today's episode, My Must Read, The Art of Profitability by Adrian Slawowski.

10:36The thing about profitability is it allows you to sleep better at night and anything that does that allows you to think clearly, be more creative, just be better at your job. Guys and gals, don't forget to hit subscribe or follow on your favorite podcast app so you get the next episode automatically. by doing so, you support the show, but you also get access to our over 2 ,300 episodes in our back catalog. So whatever you use to listen to podcasts, Spotify, Apple Podcasts, whatever it is, hit follow, hit subscribe right now. Before I go, I want to leave you with this. There's a bit of tough love in this book, kind of in your face a little, but you need that sometimes.

11:10You need somebody to just tell you like it is and to wake you up and say, hey, this is important. And I can't agree more. This is important. In my experience, one of the best feelings in the world is finishing the month, looking at your P &L, and saying, wow, I've made X amount in profit. It makes you feel like you're doing your job as an entrepreneur. It's like a gold star. And the reason why I know that's such a good feeling is because the opposite is super painful. Profitability is oxygen. Breathe that fresh air of profitability. Thanks so much for listening, and I'll check you in Wednesday's episode, Q &A Wednesday.

11:43I'll see you then. Take care.

11:50Thank you.