Is there really such a thing as bad profits? With business getting larger and more powerful, and investors feeling and expecting ever greater ROI, wouldn’t that imply that all profits are good?

It is an important question to ask.

Bad profits are those profits that are earned at the expense of customer relationships. Whenever customers feel misled, mistreated, ignored or coerced, then the result is a bad profit. Bad profits arise when a company saves money by delivering a lousy customer experience. Essentially it means that leadership or the company extracts value from their customers instead of adding overall value.

Those of you in leadership positions, those of you that run companies and manage people, understand that the culture you present to your team may lay the foundation for success not just in the short term but hopefully in the long term. The leaders who have exceptional core values and focus on good profits—and eliminate bad profits—will not only create companies with long term success, but will provide products and services that your customers will crave, want and need.

When companies don’t understand the difference between good and bad profits, the result is that growth suffers in the long term, reputations are hurt, customers become alienated and employees become demoralized. You and your business become vulnerable to competition. Your business may achieve short term success—but will always fail in the long term.

Steps to Eliminate Bad Profits
Bad profits create detractors. These are people that hurt your company and team members. They hurt your company’s reputation; they strangle growth and demoralize an organization. These detractors can be leaders, managers, employees, and customers.

The first step in avoiding bad profits is to recognize they exist, and the second step is to recognize the detractors. The third step involves deciding if you can convert your company’s detractors into enthusiastic advocates for your company. This is accomplished with top-shelf internal communication, and sterling customer service.

Create Customers that Promote
Your goal is to focus on good profits from good products and/or services. Good profits are earned with customer’s enthusiastic cooperation. They occur when their customers come back time and time again for your products and services. They want to tell their friends, family and acquaintances about their exceptional experience. When this occurs they become the best promotional arm for your business.

As promoters, these individuals provide positive marketing for your company; they are loyal and provide the most cost-effective growth for you and your company.

It has been estimated that most companies have about 42-82% of promoters receiving products and/or services. Your focus should be to improve that percentage as much as possible to boost your good profits, and this is done by training —and more training—that is backed up by outstanding leadership and communication. This is not only smart business, but good business.

Perform a Company-wide Internal Evaluation
One of the main keys to eliminating bad profits is recognizing the business behaviours that create them in the first place. To effectively identify the areas of your company that bring harmful returns, you must perform an evaluation of your entire operation.

Before you start re-evaluating your company, consider evaluating yourself or the leadership of your business.

That may be the board, partnership or an individual. Look at those who are influencer’s and find out about their core values. This may be easier than you think.

Spending time with people can tell you quite a bit about that person. If it is a dinner meeting, observe how they treat the wait staff; if it’s a golf match, see how they handle a bad shot; if it’s at a dinner party, see if they include other people in their conversation, or does the conversation just revolve around them? Do they provide solutions and the action steps to create them, or are they afraid to speak up and state what they feel and why? Are they good listeners?

In the end, would you believe, like and trust this individual, and if the answer is “yes”, you have defined a good set of core values. You should be honest and straight forward. You shouldn’t put profits before people. You should do what’s right and not just easy. You should put your customer and employees first, and make sure your team members know you’re always trying to do what is right.

Once you have the correct core values, the next step is simply putting the correct processes and procedures in place to make your business succeed.

Making good profits simply means you constantly re-evaluate yourself, your team, your customer service processes, and your products and services and constantly try to make improvement. These improvements do not necessarily have to be major changes, they can be minor tweaks that provide major improvement.

In order for business to succeed longer, a company’s leadership must have a laser focus on good profits, and create the correct processes and procedures that eliminate bad profits.