Extraordinary Business

Ever wonder what your business is costing you? Many of you can look to your P & L's to find a number. While that might be accurate to represent the total dollars you are spending, I am more interested in what lies beneath those numbers.

A company with a good strategy, strong leadership, and effective staff can be far more profitable than a business with a good strategy, weak leadership, and a staff unclear of their direction. I have seen companies with comparable sales in similar industries that have differences of hundreds of thousands of dollars (or more) in profitability. That difference could be the measure of what your business is costing you. But how can you be sure?

Here is a little test to start reading between the lines. Please keep in mind that if we are talking about averages it may not mean you do not have room for improvement. Remember, an average is little better than a C grade.

1. Advertising: How are your advertising expenses compared to the averages for your industry? What do the best companies spend? Some companies spend over four times the amount on advertising compared to the leaders in their industry. Unfortunately in most cases more advertising does not lead to greater results.
2. Turnover: How long do you retain people compared to your peers? Higher turnover can increase human resources costs exponentially through training, benefits, wages, unemployment, advertising (want ads), and recruiter bills.
3. Strategy: Great, you have a strategy. So who knows about it? How effectively is it executed? Over 90% of businesses fail to realize their strategy to its fullest potential and over 95% of employees in most organizations do not know what their company's strategy is. This can lead to even the right people doing the wrong things. In addition there can be multiple agendas, wasted time on projects not congruent with strategy, not to mention frustration, anxiety, loss of motivation, and ultimately lost sales.
4. Quality: So your quality is good, but can it be better? Each year, millions of dollars are lost to quality issues. These losses go beyond equipment failure into people related issues. Poor leadership can lead to poor morale and the "I don't care" attitude.
5. Sales: So your sales are down. It's the economy, the political climate, increased competition, the web, we lost our lucky rabbit's foot, etc. Remember, in the face of any bad economy, there are always companies that are growing and profitable. If you are not one of those companies that is growing and profitable, then you could be dying a slow death. Are sales fluctuations a blip on the screen or have steady decreases taken a bite in your profitability? There could be many reasons including the economy, but do you want your business to be influenced by the economy or do you want to be the best in your industry?

So what's your business costing you? What if you could increase your bottom line anywhere from 10-50% just by changing some of the things you already do without adding new technology? Many businesses seem to let these hidden costs go. My guess is because they cannot be seen. They remain hidden in the numbers. I would also guess that even if some companies knew the problems, they might feel powerless because they don't know what to do. What are your thoughts?

Labels: Business, Change Management, Leadership, Management, Planning, Sales, Strategy