Efficiency is something we all strive for in our lives. We use GPS apps to get us from point A to point B in the least amount of time possible. We hate when we remember we need when we are well past produce and in the bread aisle. Efficiencies in our lives is a good thing.
As the axiom states – ‘you get what you measure’ and we would agree efficiency is worth measuring. But, did you know that we already have a key measurement for our total company efficiency – and it is the ultimate measure of efficiency in any for-profit business? It is ‘net profit’.
Net profit is the remaining dollars the company has from a period after all the expenses (e.g. employees, taxes, banks) are paid. But, if you think about it – it is measuring how efficiently we turn traffic into sales, sales into start packages, start packages into settlements, and settlements into happy customers.
Every decision made in our business costs us time, money, or quality but both time and quality translate down to dollars. Remember this idea – all extra costs in time, quality, and money eventually costs us dollars. These dollars come out of only one bucket…net profit. I offer two examples:
— A home spent 10 more days than needed in production costs us money through interest expense and lost opportunity.
— A low-quality home costs us money in warranty expense and no referral sales due to a homeowner not being an avid promotor.
Net profit is our company’s ultimate measure of efficiency. Every ounce of waste eventually reduces our net profit and so a higher net profit indicates higher efficiency while lower net profit indicates lower efficiency.
The most important part – I want to emphasize what is done with net profits. These dollars are the fuel for our growth. Without net profit, we cannot reinvest dollars into our organization. This makes sense I think – we all agree that efficient companies can effectively grow while inefficient companies constantly struggle with growth.
We each can do our jobs efficiently, therefore we each can impact net profit. If we each can impact net profit, then we each can directly affect growth.