Strategic Business Solutions
| Coach your company to be a winning profit team |
| Published Thursday, February 18, 2010 7:00 am |
Sports events like the Super Bowl and the Winter Olympics can highlight important lessons about business profitability.
| Championship Profit Audit |
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Company executives are like great coaches. Take stock of your team by answering these 12 questions. It will help identify where your organization's real profit opportunities are hiding. |
Coaches and players must come up with game plans and learn from their missteps, or fumbles, in order to build a winning team. The same applies at your company. Managers must devise and execute a game plan and learn from the fumbles that hurt your enterprise's ability to score profit touchdowns. This is always an important element of corporate success, of course, but it takes on added significance as we start to emerge from a difficult economic slump.
A New Way of Looking at Your Company
Your company's earnings game plan should partly evolve from a profit audit (see right-hand box) and partly from uncovering and working to eliminate profit fumbles such as:
- Employees being unclear about the company's mission and how they fit into it.
- Staff members requiring retraining after time and money were spent to teach them how to handle tasks efficiently.
- Shipments being mismanaged and having to be redelivered.
You'll notice, for the most part, words indicating profit fumbles typically start with one of three prefixes:
- Mis-, as in misunderstand, mistakes, missed deadlines, mismanage and misplace.
- Re-, as in restock, retrain, redo, redeliver and reposition.
- Un-, as in uncertain, undone, unreliable, unnecessary and unfocused.
Take a look around your company and ask employees at all levels and in all departments where they see these types of fumbles. Then, assign a negative dollar value to each fumble that keeps your organization from reaching its full profit potential. For example, have you mistreated customers and driven them away? Have you generated unplanned or unnecessary expenses? Or do you have a warehouse full of unsold inventory.
Once you start putting a value on these profit fumbles, you can add them to your income statement for a clearer picture of how they affect your organization's net profit. Historically, unidentified and unmeasured profit fumbles are buried in lower sales and inflated costs of sales and overhead. But once you start quantifying profit fumbles, as this example shows, the picture changes:
|
Historical Statement |
Profit-Fumble Statement |
| Sales |
$20 million |
Sales |
$20.5 million |
| Minus Costs of Sales |
($10 m) |
Minus Costs of Sales |
($9 m) |
| Gross Profit |
$10 m |
Gross Profit |
$11.5 m |
| Minus Overhead/ Operating Expenses |
($8 m) |
Minus Overhead/ Operating Expenses |
($7 m) |
|
|
Minus Profit Fumbles (such as unplanned expenses, redelivered shipments and unsold inventory) |
($2.5 m) |
|
| Net Profit |
$2 million |
Net Profit |
$2 million |
Quantifying and including the profit-fumble data in your income statement clarifies the effect on your company's profit score. In this example, your net profit could have been $4.5 million, rather than $2 million ($2 million in net profit plus $2.5 million in profit fumbles).
But don't view these missteps negatively. Look at them as opportunities to increase your team's success in the future.
Once you have a profit-fumble statement, you can combine the information with challenges that emerge from the profit audit. That helps you lead your team to victory in the profitability equivalent of playing in the big game. Here are three steps to help coach your team to scoring higher profits:
1. Gather your assistant coaches (managers and key employees) to brainstorm a game plan. (Consider a two-or-three day meeting away from the office to eliminate distractions.) This is your profit team. Choose the members carefully. They must have the will and the ability to coach others toward making a profit difference. Try to limit the group to 20 or fewer, depending on the size of your business, and select at least one from each department or region. Create an atmosphere where the team can openly and honestly discuss problems without fear of retribution. You may want a meeting facilitator who can help in this process. The main goals of the retreat are to:
- Discuss in depth the top issues and challenges you want to tackle.
- Consider carefully any additional issues that emerge from the sessions.
- Reach a consensus on which profit strategies should be implemented.
Consensus is critical. Without it, some of the team might resent the idea that other people's ideas have been imposed on them.
2. Appoint team leaders. Once the group agrees on a profit strategy, assign a single person to take responsibility for it. You cannot reach your goals without this step. If the profit strategies become everyone's job, then they are likely to be no one's job and the project may fail.
3. Define the plan. The profit game plan will emerge as team members devise and agree on specific initiatives. To help this along, have profit team members calculate how much each initiative could add to the bottom line.
To arrive at these values, the individuals need to determine the projected income and how much it will cost to achieve it. This is essential because it helps them understand the financial implications of each profit-generating idea. The estimates may be tweaked later to make them more conservative and credible. The full profit game plan is completed when the dollar values are totaled, revealing the business's bottom line profit potential.
Once the profit game plan is written down and you have made someone accountable for each element, the team has a clear sense of what it can do to enhance your company's profitability. The financial goals create expectations, which in turn create results. In the end, everyone wins, including your customers.
Brian Swanson is the Director of Marketing & Business Development for Daszkal Bolton LLP. He works closely with management to provide direction in overall marketing and business development strategy for the firm. Brian has over twelve years experience in marketing and business development for professional service firms.
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