Mystery of the Missing Profits (Part 10)

The Prize

The obvious benefit of implementing the ideas we have discussed is a transformed P&L, thanks to the twin effects of a rise in revenue and a reduction in marketing expenses, as this table shows.

The growth in profits is, of course, the outcome of a strategy designed to ensure that existing customers come back for more and bring their friends. No business can ever sustain on paid acquisition of new customers alone, especially when this is happening into a leaky bucket. The mystery therefore should never have been about the missing profits; it should have been about why CEOs, boards and investors allowed the shift to lossy digital businesses!

Given that profits in digital and eCommerce area a rarity, it is perhaps important to understand the benefits of running a business not dependent on external funding (whether from investors or money-making traditional lines). The rewards of pivoting towards profitability are manifold, both in terms of monetary gains and strategic advantages. While a ‘green’ P&L is the most tangible benefit, the implications of this ‘back-to-basics’ shift run much deeper.

Independence and Freedom: A profitable venture isn’t beholden to external investors or forced to pivot based on investor whims. Profitability ensures freedom—freedom to chart one’s course, freedom to seize new opportunities, and freedom to innovate without continuous fundraising rounds.

Happy Customers turn Advocates: Profits aren’t just numbers on a balance sheet; they’re indicative of satisfied customers who return for more. Happy customers not only provide stable revenue but can also become the brand’s most potent marketers, vouching for its products and services, creating a good growth flywheel.

Reinvestment in Customer Experience: Profits can be channelled back into improving the overall customer experience. Whether it’s through upgraded tech platforms, improved customer support, or innovative loyalty programs, businesses can keep iterating and enhancing the customer journey.

Fuel for Business Expansion: Profits aren’t just an endpoint; they’re a launchpad. They provide the capital needed for business expansion, whether it’s venturing into new markets, diversifying the product line, or even making strategic acquisitions to bolster the market position.

Profits foster Innovation: Without the constant pressure to chase funds, businesses can reallocate profits back into research and development. This allows them to stay ahead of the curve, ensuring longevity in a competitive marketplace.

Employee Satisfaction and Retention: Profitable businesses can invest more in their employees, whether it’s in the form of competitive salaries, training, or benefits. This not only attracts top talent but also ensures their retention, creating a virtuous cycle of growth and innovation.

Risk Mitigation: With profits in the bank, businesses can weather economic downturns or unexpected market shifts. They have the cushion to adapt and pivot without facing existential threats, thus ensuring stability and continuity in operations.

In conclusion, profits in the digital/B2C/D2C/ecommerce world aren’t just about financial success. They represent a business’s ability to serve its customers effectively, innovate consistently, and stand resilient in a dynamic market landscape.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.