So What Is A Business Process Worth?
In today’s issue…
A Business Case To Prove It
488 words, total reading time 3 minutes
We have waxed eloquently or not for the past 5 years about the hidden profits in any CI company. We have advocated that each company should undertake a process for getting there. Aligning REVENUE and COSTS and tweaking their value in the marketplace. Now here is the easy impact math that demonstrates how much impact can be made with a few business decisions that follow a prescribed process. Our sample company is a 11 person, $2.2M in Revenue a year company, ANYCICO. They have worked hard to get to 10% profit and claim to have the best service track record in their service area. They see occasional wrinkles in the top line but have weathered downturns and are proud of their stable of trade partners and referral customers.
Here is what ANYCICO looks like on paper:
By most standards we would say this is a solid company. But what happens, if they adopt the practices of really outstanding companies in the business?
What if they charged for their labor like it was special and not a commodity?
What if they covered their true cost of installation parts?
What if they paid more for better productivity?
What if they took mgmt. actions to improve cashflow and reduce risk in the business?
All logical actions, right? Here is what happens:
It's the same headcount and cost structure but WOW what a difference.
The impact is a bit mind-blowing. Profit more than doubles. A full 12 point increase in profit level follows! The owners pay & return balloons from $300,000 to $644,000. And this is on the same exact level of Equipment Sales.
Techs are paid better; salespeople are paid better. Cash is flowing and more time can be directed to selling and production.
The Company’s balance sheet is stronger and the financial foundation going forward is better than ever. The process starts on the front-end with assuring the mix of Labor and Parts. Yes, each bid becomes more but the objective is to make a strong return on your costs.
Hidden parts costs and inefficient labor practices (billing and work completion) hide the real costs that you need to cover.
We added a four additional measures to increase cash flow.
This prescription fits virtually every CI company we have encountered. It is attainable and its right in front of you.
We hope you will take the first steps to making it happen.