If You Can’t Answer This Question About Your Business, You’re in Trouble

By November 8, 2018Business, Leadership

You might not be on your way out tomorrow, but if you can’t answer this question about your organization, you’re going nowhere fast.

An astonishing number of employees I come into contact with, though good at their individual positions, do not understand the basic functions of their organizations. The fundamental question you must be able to answer if you want to rise to an executive role in your organization is this:

Q: How do we make money?

It may seem simple, but the majority of workers do not know the answer! And, in some cases, the answer can be more complicated than it appears.

The primary product that a company manufactures and sells might not be where it makes its money. For example, companies that manufacture and sell computer printers often do so at or near cost, relying on the inflated prices of their consumables (in this case, ink) to supply their profits.

For tech companies who have not yet monetized, this can be an even more complicated question. For some, as was the case with Twitter for years, money is made through public or private investment driven by the expectation of revenue, rather than revenue itself. Therefore, money is made one step removed, by maintaining high user metrics that hint at a promising future monetization.

In order to rise to an executive role in any organization, you must embrace an ownership mindset. After all, you have been placed in a decision-making position by the shareholders of your company, and your goal, ultimately, is increasing shareholder profits.

The fundamental building block of an ownership mindset is knowledge of company revenue streams and profit sources.

Even if you are not currently in a position to make decisions about where your organization allocates its resources, knowing how and where profit is derived will help develop your executive mind.

Set aside time to contemplate your company’s revenue streams. As you do so, think about ways your company could improve its current model. Taking time to think about these organizational questions will put you a step ahead when applying for internal promotion and may end up making or saving your company millions.

THE TAKEAWAY: If you do not know how your organization makes its money, find out! Armed with this knowledge, brainstorm ways that your organization can optimize its functions to make more profit or profit more efficiently. This is the root of the strategic thinking an executive leader must have.

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