EFFICIENCY AND INCREASING PROFITABILITY
A business has to make a profit, if you set that to minimum 30% net, you’ll have enough money left over to make the game worthwhile. You will then have enough to put 10% back into another profit center in the business without having to take on more debt.
With the risinglabor costs, a business cannot just hire people without first ensuring all the services and production flow lines are running as efficiently as possible. Having efficient software can eliminate a lot of double and triple entries as well as increasing the speed to find information. A manufacturing company wanted to hire me to help them expand. Nice people, it was looking interesting. They told me they sold about 2500 different products. I asked how they managed all the inventory, and the CEO said that that was a problem. They told me they were managing it all in XL. I told them that that was hugely labor-intensive and that I would not be able to scale them out with that system. I told them that they needed to get a suitable software to manage their operation before I could take them on as a client.
Having a clean and modern environment to operate from can increase productivity and morale incredibly. These are signs that management is not slowing down. When I asked a business owner when was the last time the carpet, paint, and décor had been upgraded, I was surprised at his response. He said, “We haven’t wanted to spend the money to upgrade this location as it is only temporary.” When I asked how long he had temporarily been in that location, he said it had been 8 or 10 years. Image has a lot to do with success and expansion.
The size of a location can also hold expansion back. Some business owners get stuck in a location and think they have to make do with what they have since they had spent a lot of money on the initial remodel. It could be they need to reconfigure the internal layout or get a bigger space entirely. One client moved into a new facility over a year ago and is already renovating a much bigger facility because they have already outgrown the facility they just moved into.
As the years go by, equipment has to become more efficient as technology advances. So part of a business's financial planning has to include money being set aside for this expense.
It will be hard to keep any kind of profit percentage in place if it is not planned and managed. Financial success does not come about by accident or thinking good thoughts, it takes constant inspection and a strong intention to keep profitable expansion going. Your dashboard of statical graphs has to include profit percentages of your different profit centers or services. It’s amazing how profitable you can make a business when you put your attention on profitability.
THINGS TO CHECK FOR EFFICIENCY:
Determine the profit percentage of all products and services. This is done by accurately determining the cost of materials, labor costs and determining an appropriate percentage of the overhead to each product or service. It will be hard if you think it is going to be hard.
Flow chart out all admin and production lines look for bottlenecks.
Note down any area or person that is holding up the lines and determine solutions to resolve, Example:
In need of training.
Overwhelmed—too many jobs/responsibilities.
In need of more qualified people.
Outdated processes requiring a makeover.
Slow or outdated software.
Too high a turnover of staff an insufficient qualified personnel.
Relying on “On the job training,” and key personnel being distracted having to train new personnel.
No accurate tracking of expenses for each product, service, or department is being done.
Old equipment, having a lot of downtime for repairs.
Staff being pulled off post to work on new projects.
SOP's, (Standard Operated Procedures) are outdated or not in place at all, standards are dropping, requiring continual executive intervention.
When an organization lacks a QC, (Quality Control) division the standards and quality will drop and is the key reason executives and owners are continuously pulled down into operations. When this happens, the cost of delivery goes up tremendously because having high-paid executive hours makes the cost of delivery much higher.