Profit Pool Focus
Find where cash flow concentrates and point resources at those offers
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 6
- Confidence
- 97%
Ask the deceptively simple question: where does this business make its money? Break cash flow down by product, customer, route, or use case until the concentration is visible. Validate the answer, then point disproportionate resources at the few activities that generate the economics and cut or reduce work that merely adds complexity. At Lyft, the team found that 80% of cash flow came from airport and medical rides, so it pursued corporate travel, healthcare providers, and insurers rather than treating every ride equally. The mechanism is concentrated allocation: the same operating effort can produce very different returns, so leaders should water the plants that matter and remove the weeds that dilute profitability.
Origin
McNeill used the question at Lyft and later applied the same lens to Lululemon, where he says the company historically made its money in bottoms rather than tops.
Core principles
- 01Revenue activity is not equally valuable
- 02Cash-flow concentration should direct resource concentration
- 03Complex businesses need regular pruning
- 04Teams closest to the economics may already know the answer
How to run it
- 1
Pose the economic question
Ask the team where the business makes its money, using cash flow rather than activity or vanity metrics.
Pro tip Invite operational experts to answer before commissioning a large analysis.
- 2
Segment the economics
Break results down by product, customer type, channel, trip, or another meaningful unit.
Watch out Top-line revenue can conceal poor contribution economics.
- 3
Locate the concentration
Identify the small number of segments producing a disproportionate share of cash flow.
Pro tip Look for an 80/20-style pattern without assuming one must exist.
- 4
Validate durability
Test whether the concentration reflects repeatable demand and sound economics rather than a temporary event.
Watch out Do not over-concentrate on a short-lived anomaly.
- 5
Point resources
Shift partnerships, sales effort, product work, and capital toward the validated profit pool.
Pro tip Name what will receive less attention as well as what receives more.
- 6
Weed the garden
Regularly remove low-value complexity that accumulates around the core.
Watch out Preserve options that are strategically necessary even if their immediate margin is lower.
In the wild
A Lyft team member identified airport rides and rides to medical care as the sources of 80% of cash flow. Lyft focused on corporate airport demand and formed agreements with insurers and healthcare providers for medically necessary transport.
→ McNeill says the concentration helped Lyft double revenue.
McNeill says Lululemon historically made its money in bottoms, yet added products and categories that diluted attention. The strategic response was to simplify stores and refocus the product story around yoga, training, running, and the pants at the brand's core.
→ The North American turnaround team concentrated the store and product lineup around fewer core activities.
Common mistakes
Optimizing revenue instead of cash flow
The busiest or highest-priced segment is not necessarily the one that produces the best economics.
Adding without pruning
Redirecting resources fails if low-value products and initiatives continue consuming the same attention and capital.
Is it for you?
Best for
Established businesses with multiple products, use cases, customer groups, or channels.
Not ideal for
Very early products without enough transaction history to distinguish a durable profit pool from noise.
From the transcript
“80% of the cash flow comes from airport rides and rides to the doctor.”
“If that's where the profit pool is, we got to go hard after that.”
“let's go figure out which which of these plants matter and let's water the heck out of them, and let's whack the heck out of…”
From the episode
Episode 541: Jon McNeill: Why "Less" and "Simple" are the Smartest Growth Strategies
Jon McNeill