Why Profit Waits on Process

When profit gets thin, the first instinct is to cut. Cut hours, cut vendors, cut that subscription you forgot about. Some of that is healthy. But for a lot of businesses, cutting is treating a symptom. The money isn't leaking because the costs are too high. It's leaking because the work isn't consistent.

The pillars set the order

We think of the Five P's as stage gates. You can work on any of them at any time, but some gates need to be open before others make sense. Process is one of the big ones.

If a job gets done three different ways by three different people, you can't really know what it costs. You can't price it with confidence. You can't tell whether a slow month is a sales problem or a delivery problem. The numbers are only as clear as the work underneath them.

What inconsistent process does to profit

Here are a few of the quiet ways missing process eats margin:

• Rework: doing the same job twice because it wasn't right the first time.
• Hidden time: the owner jumping in to fix, answer or approve things all day.
• Waste: materials, inventory or supplies that get over-ordered or lost.
• Discounting: giving money back because the customer experience wasn't what was promised.
• Turnover: the cost of training new people who were never given a clear standard.

Fixing it in order

When we work on Profit with an owner, we almost always look at Process at the same time. The order usually goes like this:

• Pick the one or two jobs that drive most of the revenue.
• Write down how they get done today, honestly, mess and all.
• Simplify it into a short checklist or standard.
• Hand it to the person who should own it.
• Then measure: time, cost and quality, the same way every time.

Once that work is steady, the numbers start telling the truth. Now a pro forma means something. Now a monthly P&L review shows real trends instead of noise. Now pricing decisions can be made from data instead of gut feel.

This is also why we're careful about marketing spend early on. Promotion brings more customers into whatever system you already have. If the system is shaky, more customers just means more rework, faster.

Start small

You don't need an operations manual the size of a phone book. Start with one checklist for one important job. Use it for two weeks. Fix what's wrong with it. Then write the next one. Process is built one routine at a time, and every routine you write gives you a little more of your day back.