Not Business as Usual: Decisions to follow resolutions
January 9, 2018
This is certainly the time of year when individuals make resolutions but it is also a great time for businesses to undertake a similar resolve. Given the seasonal nature of business here in Grand County, I can think of no better place to start than with people and cash.
Now taking these resolutions a little farther, let's take a look at a couple of implementation ideas for these best of intentions.
From a training perspective, simply sit down and critically evaluate the main functional areas of your business and stack rank in importance the areas that need the most work. For many, using the traditional Value Chain model helps in this framework in a couple of interesting ways. First, it allows you to focus on internal training (aka profit enhancing) opportunities in a way that connects individuals with specific activities/needs. Secondly, it allows you to see in a different perspective some opportunities that may exist by "outsourcing" those activities that are not of strategic importance. For example, if you are in the business of providing some type of product, why spend a lot of money training someone in the rudiments of order fulfillment when there are companies that specialize in this function and can do it better and cheaper than you can. Better to spend that same money on improving design or manufacturing or selling, whatever you deem as a core strategic competency. Just please bear in mind that every function in your business cannot be a core competency!
Now for a cash conservation exercise please consider the following. Challenge yourself and your employees to reduce your first quarter operating expenses by a targeted amount, say seven percent. To add a little emphasis to the process, share with them the budgeted amounts that will be the basis of the calculations, break it down into monthly targets, and then announce with all the appropriate fanfare that success in this endeavor will have a financial impact on their pocketbooks. This, of course, is the result of your communicating that half of the seven percent savings will go into a pool that will be divided among all those responsible for the implementation of the control. You also want to make sure that everyone knows that an additional component of this program is the concurrent achievement of the revenue target. This tends to keep everyone aware of the need to support and help the sales force at every opportunity.
A couple of interesting outcomes can be the result of these simple implementations. First, you have the reassurance that your training investment dollars are, indeed, going where they can do the most good. Second, success in first quarter savings ought to be a blueprint for continuous savings throughout the year. To put this in perspective and to keep it very simple, if your net profit margin is 10 percent and your operating budget is $100,000, then a sustained 7 percent annual reduction in operating expenses is the same as generating an additional $70,000 in sales without having to sell one more widget!
Most entrepreneurial managers do not need to be reminded to work harder. They already physically and emotionally commit themselves to the success of their enterprise. But success can be enhanced by working a bit smarter. Hopefully, these couple of simple resolution suggestions may contribute to this smarter part
Following a successful international business career, John Riddell turned his attention to small business/entrepreneurial pursuits that included corporate turn-arounds, start-ups, teaching as an adjunct business school professor, authoring award winning business and sports columns, and serving as VP for the Chattanooga Chamber.