1. DIRTY LITTLE
START-UP
SECRET #7
OPERATIONS
EATS SALES FOR
BREAKFAST!
http://www.flickr.com/photos/matthew_norris/

2. too many entrepreneurs get
hypnotized by growth
(volume or revenue)

3. when what really matters is
margin

4. BUSINESS MODEL 1
Units Sold 1,000,000
Price per unit $1
Monthly Revenue 1,000,000
Monthly Cost 990,000
Monthly Profit 10,000
Profit Margin 1%
BUSINESS MODEL 2
Units Sold 100,000
Price per unit $1
Monthly Revenue 100,000
Monthly Cost 50,000
Monthly Profit 50,000
Profit Margin 50%
a million in revenue for a
million units sold doesn’t look
so sexy now, does it?

5. so how do we maximize
margin

6. well it starts with some very
basic math

7. let's start with the formula for
profit margin

8. profit margin =
profit
revenue

9. now let's do some simple
algebraic substitution

10. margin =
profit
revenue
= (volume x price) – cost
volume x price
= revenue – cost
revenue
=
(volume x price) – (volume x unit cost)
volume x price
Expand out
profit to (r - c)
Expand out
revenue to (v x p)
Expand out
cost to (v x c)

11. margin =
=
=
=
(volume x price) – (volume x unit cost)
volume x price
volume x (price – unit cost)
volume x price
price – unit cost
price
From the last
slide
Simplify!
price
price
unit cost
price
-

12. margin =
=
From last
slide
price
price
unit cost
price
-
unit cost
price
1 -
holy cr@p!

13. profit margin =~
unit cost
price1 -

14. in other words

15. selling more units (volume),
does not in itself mean your
business is healthier

16. what moves the dial is…
1) raise price
2) lower costs

17. but….

18. in most competitive markets,
raising price (especially
significantly) is not an option

19. which means that

20. the magic of margin

21. is all done with cost per unit

22. that’s why sales & marketing is
basically illusion and hypnosis

23. while operational management
is the dirty little secret of
success

24. so how do you reduce unit
cost?

25. simple

26. process excellence

27. and how do you get excellent
with your processes?

28. you map out where your
processes are weak or
inefficient

29. and you fix them

30. one at a time

31. i’d now like to share with you a
tool that would be used by you
and your management team

32. to identify areas to target

33. but

34. due to the limitations of
slideshare, you must
download this deck to make
the tool work

35. please download and then
view the next two slides in
native power point.
it’s free.

36. here is a tiny version of what
you’ll find on the next slide
WARNING: you must manually
use the scroll bars in order to
use it

37. Cultivate
Productive
Assets
Cultivate
Productive
Assets
Produce
Product /
Service
Produce
Product /
Service
Distribute
Product /
Service
Distribute
Product /
Service
Administrate
Firm
Administrate
Firm
Operational Activities are defined as a set of business
processes required to execute business strategy. Not all firms
will have the same activities but they probably all have the same
core of 4 and most start-ups and small companies will not be all
that far off.
As a small company, you won’t have time to fix everything, but
you should 1) know where you stand in terms of operational
maturity (by mapping out processes as is the case here, and
assigning maturity ratings) and 2) have a plan as to what things
you will invest in improving. For example, you might target the
“red” items in the map. Or you might find that you’ll get better
ROI by focusing on 4 of the yellow processes.
Whatever the case, this is an example map (scroll left, right, up
and down to explore) of operational processes that seem
generic enough to me that they might be useful as a baseline for
whatever company you are running.
Activities mature and working smoothly
Activities are being performed, but there are opportunities to improve efficiency and/or effectiveness
Activities are not being performed, but should be
Activities are not being performed, but are not relevant for our business at this time
Scroll to see processes!
Scroll to see more!

38. what you need to do now

39. is duplicate this map with
processes specific to your
business
(I bet I nailed 86% of them though) 

40. and, as a management group
activity, use color post-it notes

41. to map out your own maturity
levels

42. then, start actioning change

43. but remember…

44. focus on change that moves
the dial on cost per unit

45. don’t geek out on every
opportunity….

46. good luck!

47. and make it fun!

48. SHARE THIS DECK
& FOLLOW ME(please-oh-please-oh-please-oh-please)
stay up to date with my future
slideshare posts
http://www.slideshare.net/selenasol/presentations
https://twitter.com/eric_tachibana
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49. CLICK HERE FOR
MORE!!!!