BREATHING YOUR OWN EXHAUST STIFLES PROFITABILITY
By Bill Lee
Owners and managers that work day in and day out in their own businesses are often guilty of what I call breathing their own exhaust. They find themselves in a rut. Their only source of new or innovative ideas is from each other. Creativity is stifled. Profitability is almost never optimized.
(This article is an excerpt from Chapter 13 in my new book, 30 Ways Managers Shoot Themselves in the Foot. See www.BillLeeOnLine.com)
Several years ago, my firm received a recruiting assignment from Jerry’s in Eugene, Ore. If you’ve never visited Jerry’s, you have missed out on a real treat; it is an independently owned “box” store, owned and operated by Dennis Oram and his management team. Even following the onslaught of Home Depot, Jerry’s continues to thrive and prosper.
My best friend’s daughter and her husband recently moved to Eugene to work at the university there. When I mentioned Jerry’s to them, their eyes lit up like a Christmas tree. “We love to shop at Jerry’s,” they said almost simultaneously. “The service there is terrific and they have everything.”
When I first met Oram, he told me something about his management philosophy that I had never before heard an owner say. “Eugene is not exactly the Mecca of innovation for retail marketing and merchandising,” Oram told me. “We budget over $50,000 annually to take our management team around North America to visit other retailers that can teach us something new. We long ago learned everything that each other knows. To continue to stay on the leading edge, we have no choice but to travel to other markets and see what others are doing.”
As a consultant, about all I have to offer my clients is a result of my exposure to highly profitable well-managed businesses. I have visited literally thousands of businesses over my 35-year career. On consulting assignments, I delve into the bowels of businesses. While I am able to bring new ideas to my clients that help them improve productivity and profitability, I also am in a position to learn what each of these businesses are doing better than anyone else.
How many businesses similar to yours have you visited over the past year? If your business is not earning a minimum of 6% to 8% before taxes, you’re missing out on a big profit opportunity. My advice: Get away from your business three to four times a year to breath in some fresh, new and innovative ideas that you can take back home with you.
One of the best concepts to come down the pike over the past decade has been owner and manager roundtable groups. If you’re not in one, you need to find one to join or start one of your own.
In the roundtables our company facilitates, we are seeing pretax margins soar among the participants, some as high as ten percent before taxes. What’s the secret, you might ask? The secret is very simple. Non-competing owners and managers sit around a table and compare their financial results in virtually all categories. If, for example, one dealer is spending, say, 52% of gross profit dollars on people-related expenses and another is spending only 45%, you’re looking at a pretty significant affect on the bottom line. It behooves the poorly performing manager to ask some questions and do some digging to find out why this particular manager is getting so much more productivity out of his people.
Think about it this way: Every business I have ever worked with is doing something better than every other business. If I can uncover what that something is, I become a much smarter consultant. The same is true for you. If you can find out what the other non-competing businesses are doing more effectively than you are ¾ and you have the courage to implement these ideas in your business ¾ your productivity has to improve.
Managing a business is not rocket science, but neither is it a “no-brainer.” Just maybe the way you’re doing things at your place of business is not nearly as efficient as the way someone else is doing them.
What if you found out that another operations manager is achieving $2.2 million in annual delivered sales per truck and you are only achieving $1.5 million? Wow, that’s represents a 47% better job. Think about this difference in terms of the number of drivers and trucks he needs versus the number you need to deliver the same volume of merchandise.
What if you learned that another dispatcher has achieved an average turnaround time of 13 minutes and your drivers average 26 minutes between each delivery? If I were you, I’d want to ask a lot of questions.
To improve productivity and your profitability, get outside your own business and tour businesses that are making substantially more money than you are.
Go to www.BillLeeOnLine.com for more information on Bill’s new book, 30 Ways Managers Shoot Themselves in the Foot.