Is Your Business Truly Profitable?
Guest #226: Drew Lyon
Introduction: In a recent enlightening podcast episode, we had the privilege of hosting Drew Lyon, an esteemed business advisor and Forbes Council contributor, recognized as one of the Top 25 Young Professionals of 2020. Drew delves deep into the often-misunderstood realm of business profitability, sharing invaluable insights and real-world examples. His approach to dissecting and rebuilding businesses provides a fresh perspective on what it really takes to be successful.
The Illusion of Profitability:
"Most businesses and business leaders have a certain perception of their business, of what they do, how they do it. Most times, they've been telling themselves great lies," Drew states.
His approach begins with breaking down this illusion, highlighting a case where a business believed they were thriving, but in reality, faced a 20% churn rate. Through meticulous reporting and customer segmentation, Drew's team brought this churn down to 5%, revealing the hidden potential within the business.
Beyond the Bottom Line:
Drew's strategy transcends mere profit-making. In an intriguing turn, he recounts increasing a client's profitability by 30% in the first year, only to run them to zero profitability the next. This deliberate move was part of a bigger plan, underscoring the importance of strategic planning and adapting to business needs.
The Secret Ingredient:
When asked about his success, Drew shares,
"I don't give a shit about money. I have a mission of I want to help people through entrepreneurship."
His philosophy is rooted in a deep desire to make a difference, which he believes is essential to overcoming challenges and achieving success.
Case of Misguided Accounting:
Drew recalls working with a food company that was inadvertently losing money on every unit sold due to improper accounting practices. By realigning their understanding and renegotiating costs, they turned the business around, doubling in size. This highlights the critical need for accurate financial insights in decision-making.
Raising Capital with Clarity:
On securing over $100 million in funding for clients, Drew emphasizes the importance of understanding unit economics and the story behind the numbers.
"It has to be simple...breaking it down and truly understanding your business," he asserts.
This clarity is key to successful capital raising.
Drew's insights shed light on the often-overlooked aspects of business profitability and success. The core takeaway is the importance of a clear understanding of your business metrics, strategic flexibility, and a purpose beyond profit.
As Drew profoundly states, "Money always follows passion."
For business leaders and entrepreneurs, this episode serves as a reminder to look beyond surface-level success metrics and delve deeper into the fundamentals of your business. Assess your strategies, realign your goals, and remember, true success lies in making a meaningful impact.