Margin Building

  • As managers and owners, we all share the same objective: "Make the business profitable enough to pay the bills, keep the bank happy and fuel growth." Oh, and it would be nice to have some discretionary income that isn't spoken for. But, where do you start if the profits aren't meeting your expectations?
  • An old adage worth repeating goes: "Plan enough time to work on your business, not just in your business." In my experience this is easier said than done. The daily demands of running any business of any size simply have a way of consuming all of our time and attention. The first step I suggest is to understand that there is a vast difference between running a business and building a business. Those that spend all of their time running the business are more likely to repeat the patterns that keep the business profits low, while those who learn to work on the business are better equipped to find unhealthy patterns and practices that, when eliminated, can free up profits and propel growth.
  • If you learn to find time to plan and work on the big pictures you may define opportunities to accelerate growth, improve profitability allowing you to layer in trusted managers.
  • Start with this simple exercise. Take a couple of hours one afternoon with your most trusted staff members and work on this question. "Do we have any business practices that we don't need, ones that we do just because we've always done them?" Your goal in this discussion will be to come away with two or three internal business practices that might be eliminated, streamlined or replaced that could save money or better yet free up valuable resources to deploy on more profitable activities.
  • One of the most depressing discoveries happens when you realize that over time, and even with the best of intentions, your company has become the victim of policy creep. In other words, while you were busy with other matters, someone or group in your business has implemented policies or procedures that are costly, unnecessary and not in alignment with your philosophy. They meant well, but they didn't take the big picture into consideration or fully evaluate the costs or outcome.
  • Allow me to give you an example. Our largest customer base is our security system monitoring business. We have thousands of customers who pay us monthly to monitor their home and business security systems. Every security panel that we install has a program that tells it how to operate. Sometime, about three years ago (know one knows for sure) our service department (know one knows who) decided that since we can remotely communicate with these security panels, we should start remotely uploading the program to each panel and take this duty away from the field installer. This would benefit us in two major ways. First we would get more consistent standardized results and cut down on programming errors by taking this duty away from the field installer and having the office do the programming. Second we would have the program saved at the office and if a panel ever crashed, the program could easily be uploaded into a new panel with no programming required. This policy was implemented with the best of intentions, but never floated by the rest of us. It sounded like a good idea at the time, but no one ever monitored the results of the policy to see how it impacted others and to make sure it was getting the desired results.
  • As it turned out there were several problems with this policy. First it assumed the worst in our field technicians and rather than place the burden for quality on our installer and the project manager, the policy assumed that they couldn't do their job right. Also, we install dozens of new systems every week. Now every installer had to go through one office person to get the programming completed. They ended up waiting for 30 minutes to an hour plus on each install to get in line on the phone with the office and complete a fairly simple task. And finally, our operations department did such a good job on the installations and the product was so reliable that we rarely ever experienced a total equipment failure so we really didn't need a copy of the program on file. It would have been cheaper in the long run to start from scratch if the worst case ever occurred.
  • When we finally questioned this policy we found that it was costing us between 50 and 100 man-hours each week and no one could point to any tangible benefits. It was pretty easy to eliminate this policy and transition the process back to the installers.
  • If you take the time to work on your business, go searching for profitability and engage your staff in like-minded thinking, what would you find? Sometimes the answers are right under your nose.