Dec 162011

Waste not, want not

It’s very easy in a business to focus on the big stuff and forget about the impact the small stuff has.  But it’s the small stuff that can really end up making a difference to the overall success of your business.  However, getting the message across to the team can sometimes be difficult.

I’m an avid fan of making sure the team are kept informed about what’s going on in the business and I see it as one of the fundamentals of running a business properly.  One vital tool you need to use is a business dashboard; but, aligned with that is also a need to ensure that the team have a broad understanding of how a business runs.

The value of doing things like giving basic, informal business classes to the team was well illustrated to me by a company that had done just that.  They had spent an hour or so each week giving the team simple examples of how cashflow worked, the differences between gross and net profit and a whole host of other ‘Business 101’ lectures.  They were all done informally and, despite a little bit of bewilderment and “why are we doing this” questioning at the start, pretty soon things changed and interest grew.

The business realized the teaching was really starting to pay off after a lecture on profit margins had taken place.  During the lecture it was explained that for every $100 in sales only $8 was net profit.

A few days later the management provided coffee and donuts at the next meeting and one of the team asked how much it had cost for the coffee and donuts to be supplied.  The Managing Director said it was about $20 all told.

“So, at 8% net profit, we have to make an additional $250 in sales just to pay for this meeting?” said the team member.

BAM!  With that simple statement the message about waste and inefficiency in the business really hit home to everyone.  In the weeks and months that followed the message was continually reinforced by team members questioning everything against the “so how many $$$ in extra sales is that costing?” question.  Within a few months the net profit had risen to $10 for each $100 of sales – an increase in net profit of 25%.  Would you like that in your business…?

Bringing the mechanics of a business to life can be difficult sometimes but when you are able to do it, in a way like the above example, it can make a huge difference.