Not all numbers are the same.

Some have a much larger impact on the outcomes in your business.

And those are the ones we want to mine for.

Today we talk about revenue and profit drivers you might have missed.

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Unlocking Profit: 5 Key Drivers in Your Business

Every business has performance drivers—the key inputs that have an outsized impact on financial outcomes. You’re likely familiar with some of them, but most business owners don’t think about them systematically enough.

These drivers are the turning points in your business. Some are deliberate strategic decisions—like a pricing change or a marketing shift. Others happen passively, without much thought, and slowly shape your results over time.

The goal today is simple: Identify the high-impact areas that influence your revenue and profit.

This week, we’re focusing on the drivers that directly impact revenue and profitability. Next week, we’ll shift to cash flow drivers.

I break Revenue & Profit drivers into five key categories:

1. Positioning & Pricing – How you define value and extract it from the market.
2. Marketing & Sales – How you acquire, convert, and retain customers.
3. COGS & Direct Cost Optimization – How you control direct costs to improve margins.
4. Operational Efficiency & Expense Management – How you eliminate waste and improve productivity.
5. Financial Leverage & Scalability – How you structure debt, capital, and reinvestment for growth.

Rather than getting lost in surface-level tactics, today’s focus is on big-picture levers that drive results. The goal is to get your wheels turning—helping you reframe aspects of your business and recognize which drivers are shaping your outcomes.

Once you’ve identified your key drivers, you’ll be able to integrate them into your reporting systems—something we’ll dive deeper into in the coming weeks.

Let’s dive in.

POSITIONING & PRICING

How your product or service fits into the market determines how much value you can extract from customers.

The key levers you can pull:

1. Pricing Strategy – Aligning price with perceived value, market demand, and profitability.
2. Product Differentiation & Offerings – Ensuring your product/service stands out while meeting customer needs.

THE POSITIONING PROBLEM

Most businesses don’t fully understand where they sit in the market. Are you offering something unique, or are you selling a commodity?

Even if you think your product is the same as everyone else’s, there’s almost always a differentiation—whether intentional or not. The question is:

• What makes your offering different?
• Does that difference justify a premium price?

Messaging alone can shift your positioning and increase the perceived value of your product.

Fast food burger joints all sell burgers, but each has a unique brand and experience that creates separation. You can differentiate in three key ways:

1. Quality of Offering – Better materials, craftsmanship, or service.
2. Branding & Market Positioning – The emotional and visual cues customers associate with your business.
3. Diversification of Offerings – Expanding or specializing to appeal to specific customer segments.

Aligning these levers with your pricing ensures customers feel they’re getting the right value.

Branding decisions—even subtle ones—send signals to your customers.

I still choose Home Depot over Lowe’s, partly because of the brand’s orange color (thanks to my Oklahoma State roots). Sure, I have practical reasons too, but that emotional connection matters.

Walmart signals low price, low quality, and that’s the value customers expect. Whole Foods signals premium quality, premium price—which attracts a different crowd.

Even small businesses send signals. A contractor with an unbranded truck and no website tells customers, “I’m your guy, no frills.” A polished brand with a clean online presence signals professionalism—and may attract a different type of customer.

MAXIMIZING VALUE EXTRACTION

From a financial standpoint, the goal is to price based on perceived value:

• If your brand is worth $20, aim to extract $19.95—not out of greed, but because that’s what the customer values the interaction at.
• If your brand is about affordability, you may intentionally leave value on the table (charging $15 instead of $20) to align with your positioning.

This isn’t a one-size-fits-all equation. It’s part art, part strategy, and most businesses don’t give it enough thought—which needs to change.

Consider the three key elements—quality, branding, and diversification—and what they signal to your customers.

What about offering one core product or service signals to signal expertise? By offering more, you might dilute that authority.

Every decision about your offer, branding, and pricing should reinforce a clear, intentional market position.

Start by refining your message—then align your pricing with the value customers already see in your business.

MARKETING & SALES

How you attract, convert, and keep customers can mean you’re either maximizing long-term revenue or not. And too many small businesses are minimizing their revenue instead of maximizing it.

When considering these drivers, try and understand:

1. Marketing & Demand Generation – Finding and reaching new customers cost-effectively.
2. Sales Process & Conversion Optimization – Improving efficiency in closing deals and onboarding customers.
3. Retention & Lifetime Value – Maximizing revenue from existing customers through loyalty, upsells, and repeat purchases.
4. Customer Acquisition Cost (CAC) Management – Ensuring acquisition is profitable based on lifetime value (LTV).

Once we’ve gotten our product and pricing nailed down, it’s time to talk marketing.

I like to focus on customer acquisition cost and retention first, as understanding these two elements can create a very clear list of action steps moving forward.

If you know your CAC, you know how much you can afford to spend to acquire new customers—and what your growth potential is.

If you improve retention, you reduce the pressure on marketing to constantly bring in new leads. Instead of replacing lost customers, you’re adding to an existing base.

CUSTOMER LIFETIME VALUE (LTV)

Customer Lifetime Value (LTV) is one of the most important metrics in this area, but one I rarely see people understand.

LTV = Customer Value × Average Customer Lifespan

Example:

• A customer buys a $50 shirt, four times over two years.
• Their total value = $50 × 4 × 2 = $400
• If your margin is 15%, their value to the business is $60.

Now, compare that to Customer Acquisition Cost (CAC):

• If your CAC is $30, you’re making $2 for every $1 spent on acquisition—a strong position.
• If your CAC is $60, you’re losing money every time you acquire a customer.

This is why CAC and LTV must be balanced. If your acquisition cost is too high or your retention is too low, you’re running on a treadmill going nowhere.

To improve your numbers, focus on three areas:

1. Reduce customer churn (keep customers longer)
2. Increase customer frequency (get them to buy more)
3. Lower acquisition costs (improve efficiency)

Each of these can be accomplished 20 different ways, like:

• Offer a referral program to lower CAC.
• Experiment with new marketing channels to find better-cost opportunities.
• Refine your sales process to increase conversions.
• Upgrade customer service to improve retention and repeat business.

Every industry has different customer behaviors, marketing channels, and cost structures. But tracking and understanding these metrics deeply is the key to making informed, profitable decisions—because they change fast.

COGS OPTIMIZATION

For a quick and easy fix, reducing cost directly tied to delivering your product/service is often the most impactful lever you can pull.

A small reduction in supplier or production costs often outweighs large cuts in overhead. For example, negotiating a 2-3% decrease in supplier costs can have a bigger impact than cutting 10-20% in admin expenses—because COGS scales with revenue.

Let’s break it down:

• Say your Gross Margins are 40% and Profit Margins are 15%.
• On a $1M revenue business, a 1% increase in Gross Margins adds $10,000 in net profit—a 6.7% profit increase ($150,000 → $160,000).
• On a $10M business, that same 1% shift means $100,000 in additional profit.

Small improvements compound as you grow. Getting these cost structures right early makes scaling easier and more profitable.

The main ways to optimize COGS fall into three categories:

1. Supplier & Material Costs – Negotiating better deals, alternative sourcing, and cost-efficient materials.
2. Production & Process Optimization – Reducing per-unit costs through efficiency.
3. Supply Chain & Inventory Management – Avoiding excess costs related to logistics and inventory.

Many businesses lock into a single supplier and never reconsider it—even as they scale.

Yes, switching suppliers has costs and risks. But staying out of habit is not a strategy. The key question is:

• Does this supplier still provide the best value at my current scale?
• Are there better pricing structures or service levels I could negotiate?

Sometimes, even marginally better options aren’t worth switching for. But this should be an intentional decision, not a default.

WAYS TO REDUCE COGS

Consider these strategies to lower direct costs:

1. Renegotiate supplier pricing based on volume increases or market shifts.
2. Optimize production processes to reduce time, waste, or material costs.
3. Outsource underutilized tasks to specialists instead of keeping them in-house.
4. Source materials or products from alternative suppliers to compare pricing and quality.
5. Introduce automation to streamline labor-heavy processes.
6. Improve quality control to reduce rework and defective products.
7. Negotiate better freight & shipping rates to cut logistics costs.
8. Implement software to improve forecasting, purchasing, and inventory management.
9. Maximize labor efficiency to lower the labor cost per unit produced.

These tactics apply to both product and service businesses, though the specific levers will vary.

Because every business is unique, there is no one-size-fits-all answer. This is just a sampling to get your wheels turning. But revisiting your COGS regularly—especially as you grow—ensures you’re not leaving easy profit on the table.

OPERATIONAL EFFICIENCY & EXPENSE MANAGEMENT

Improving operational efficiency isn’t just about cutting costs—it’s about ensuring your business runs smarter, not harder. The goal is to eliminate waste, streamline processes, and maximize productivity, so your business can grow profitably without excess overhead dragging you down.

Many businesses operate with outdated systems, bloated expenses, or inefficient workflows. The good news? Fixing operational inefficiencies and reducing expenses often has the least impact to your product/service, which can make it “easy.”

Think in three categories:

1. Automation & Process Improvement – Reducing labor and manual inefficiencies.
2. Overhead & Administrative Expense Control – Cutting waste in fixed costs.
3. Workforce & Resource Optimization – Improving how staff, tools, and technology are used.

One of the biggest mistakes businesses make is holding onto outdated processes simply because “that’s how we’ve always done it.”

Ask yourself:

• Are there manual tasks that could be automated?
• Do we have subscriptions or services we no longer use?
• Are employees spending time on low-value work instead of high-impact tasks?

WAYS TO OPTIMIZE EFFICIENCY

Improving efficiency isn’t about cutting corners—it’s about getting more from what you already have. Every business has hidden inefficiencies that add unnecessary costs and slow growth. The key is to identify where time, money, and resources are being wasted and make strategic adjustments.

Some low-hanging fruit for optimizing operational efficiency:

1. Cut unused software or subscriptions – Audit recurring expenses and eliminate tools that aren’t providing ROI. Many businesses have outdated or overlapping software that adds unnecessary costs.
2. Consolidate vendor relationships – Working with fewer vendors can give you better pricing, stronger relationships, and bulk discounts.
3. Outsource specialized services – Free up staff by outsourcing IT, HR, cleaning, or other non-core tasks. If your team is stretched thin or handling things outside their expertise, outsourcing can reduce costs and improve quality.
4. Audit staff duties & streamline roles – Are employees working efficiently, or is there overlap, redundancy, or wasted effort? Small tweaks in responsibilities can make a big difference.
5. Implement automation tools – Use software to handle repetitive work like invoicing, scheduling, and customer follow-ups. Automation saves time and reduces the risk of human error.

Optimizing operations isn’t just about cost-cutting—it’s about efficiency and scalability. A more streamlined business is a more profitable business, and every wasted dollar represents lost opportunity.

By doing this sort of review at least annually, you can keep your business lean and prepared for the next stage of growth.

FINANCIAL LEVERAGE & SCALEABILITY

Managing financial structure is critical to ensuring that profitability isn’t eroded by debt, capital misallocation, or inefficient reinvestment. Too much leverage can choke growth, while smart financial structuring allows businesses to scale efficiently and sustainably.

The right balance of debt, reinvestment, and margin expansion determines whether your business can grow profitably—or if financial constraints will hold you back.

Some key levers to consider are:

1. Debt & Capital Structure – Ensuring leverage supports, rather than hinders, profitability.
2. Scalability & Margin Expansion – Keeping profits growing faster than expenses.
3. Strategic Investment & Reinvestment – Allocating capital into the highest-ROI opportunities.
4. Leverage: too high a debt or capital expenditure load can make a solid business unprofitable.

Debt isn’t inherently bad—it can accelerate growth when used correctly. But too much debt, especially in low-margin businesses, can strangle cash flow and limit reinvestment.

Every dollar spent on interest payments is a dollar that can’t be reinvested in growth, hiring, or improving margins. The key is structuring debt in a way that supports profitability rather than draining it.

HOW TO OPTIMIZE DEBT & CAPITAL ALLOCATION

1. Reduce Debt Load – Pay down high-interest or unnecessary debt to free up cash flow.
2. Extend Loan Terms – Lengthening repayment terms can reduce short-term cash strain and improve flexibility.
3. Seek Lower, More Predictable Interest Rates – Refinancing or negotiating better rates can protect against financial volatility.

While we won’t get deep into this today, because it’s more of a cash flow driver, we can talk about one: The Interest Coverage Ratio.

Banks and investors often look at the Interest Coverage Ratio to gauge how well a business can manage its debt and we can use it in our businesses as a proxy for understanding our ability to pay off debt (though there are other things I like better, which we’ll talk about next week).

Interest Coverage Ratio = EBITDA (Earnings before Interest, Taxes, & Depreciation/Amortization) ÷ Interest Expense

This metric tells you how many times your business can cover its interest payments. A higher ratio is better, as it means:

• More free cash flow available for reinvestment.
• Greater financial stability in case of downturns.

A “good” Interest Coverage Ratio varies by industry, but if you have bank financing, your lender likely has a minimum requirement.

The best businesses use leverage strategically—not as a crutch. If debt is eating up too much of your cash flow, profitability and growth become harder to sustain.

Ask yourself: Is your financial structure helping you scale, or is it holding you back? The answer will determine your path to sustainable profitability.

WRAPPING UP

Different variables are more important for different businesses. It’s only by going through the different elements of your financial statements that you can ask the deeper questions needed to analyze these costs.

Next week we’ll be talking about Cash Flow Drivers, which is foundational to a health business. The big problem? Too many don’t measure them.

Can’t wait to dive deep then!

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