“Most business owners are so busy worrying about the day-to-day things that they really don’t take the time to step back and create a plan for being profitable,” charges Dave Brockman, founding partner of Brockman, Coats, Gedelian & Co. and director of the company’s Profit Enhancement Process.
Does the assessment sound too familiar for comfort?
The good news is that Brockman says you may be able to rectify the situation by following some basic steps of the Profit Enhancement Process, a program founded eight years ago in Maryland by a CPA and the proprietor of a family enterprise to address problems commonly faced by business owners.
1. Focus attention on profits instead of sales. Most businesses, Brockman says, are driven by the latter instead of the former — some to the extent that their owners don’t even know which customers, products or services generate the most money.
To change that mindset, he suggests business owners rate their bottom line on a scale of 1 to 10, then ask themselves what improving that rating by a single number would mean to their bottom line. Brockman says most clients project an increase of several hundred thousands dollars.
2. Share the responsibility of profit-making with everyone in the company.
“Employees generally understand that there’s a need to make money in order to pay people, maintain facilities, buy equipment and inventory, and generate a return on your investment,” Brockman says.
Those who don’t may be motivated by learning about the benefits they’ll reap by working for a more profitable employer — if not enhanced compensation and bonuses, then improved technology and equipment to work with, for example, or the ability to attract better-qualified employees.
“Many times, employees don’t realize that profits are reinvested back into the business in some form or fashion as opposed to being taken out of the company.”
3. Make sure the company conveys the message that there’s a need for profitability.
“In closely held businesses, there’s a reluctance to share information, especially the bottom line,” Brockman says.
As a result, employees may believe a company is faring better than it actually is. Those who aren’t ready to embrace an open-book style of management should at the very least consider relaying components that relate to employee performance: profit margins, percentage of on-time deliveries, customer satisfaction ratings, etc.
4. Open up communication within an organization.
“One of the greatest things you can do to enhance profitability is to get people to talk more about how to be more profitable,” Brockman says.
Such conversations can yield incredibly useful suggestions. During one session at Brockman’s office, a truck driver for a trash-hauling company suddenly realized that drivers and passengers were staying in the garbage trucks as the trucks were weighed. And the dump site was charging per pound. The oversight, when corrected, saved the company approximately $78,000 a year.
During another meeting, the sales representatives of a moving and storage company divulged that they were spending only about 12.5 percent of their time in the field — most of their days were filled with completing paperwork. The cost of hiring administrative staffers was more than justified by the $250,000 increase in net profits generated by a sales force that was actually calling on customers.
“The front-line employees — the people actually doing the work — really know where they can save you money,” he says. How to reach: Brockman, Coats, Gedelian & Co., (330)
