Thursday, August 12, 2010
By Tony Jacowski
Many people assume that growth is an excellent indication of increased profits. Growth does not necessarily mean a business is more profitable, however. Many times, just the opposite is true. With growth come additional costs. New buildings are a major expense. There is the property to purchase accompanied by increased taxes. There are countless sundry expenses such as furniture, employee wages, utility bills, cleaning services, employee health care, and the list goes on.
A business doesn't have to get bigger to become more profitable. Streamlining involves trimming, pruning and otherwise cutting out the deadwood. Almost every business owner or manager can find ways to reduce costs in structures and improve employee efficiency. Even reducing waste in small ticket items such as office supplies can considerably improve the bottom line.
Business streamlining often involves a major change in employee attitude to be most effective. It isn't uncommon to overhear employees make statements such as, "I don't care what it costs, the company is paying for it. It's not my money." At one small business, a salesperson was asking for improved healthcare benefits, while at the same time turning in travel vouchers for more miles than he was actually driving on company business. When the business owner told him that the company was struggling financially, and that he, the owner, was often taking home no paycheck at all, the employee stated, "It makes no difference. Your job is to ensure the welfare of your employees." The salesperson seemed unaware of the financial realities of running a business. He didn't understand that the financial welfare of the business must come before employee benefits can improve.
Business streamlining is most effective when the employees are voluntarily involved. Educating them and showing them the monthly figures can go far in improving employee cooperation, especially when the business attaches employee rewards to such improvements. In the case of the salesperson previously mentioned, he was offered a reward of both financial remuneration and improved health benefits if he hit certain sales goals. In his case, the reward offer fizzled. He not only did not increase his sales, they went down.
To improve business streamlining, the small business improved its own operations by getting rid of the salesperson and hiring a new one. The new salesperson hit the ground running. He recognized the need to find new customers, and went to previously untouched areas where he made new contacts and sales. There was an immediate spike in sales his first month on the job. It improved the business financial situation, and brought rewards to the salesperson as well.
In addition to employee awareness, reduced spending for unnecessary supplies, utility payments, gasoline and other expenditures can really add up. Other ways to improve business streamlining include hiring experts for advice in cost reduction, working with equipment suppliers to seek lower lease payments on equipment and so forth. Anything that helps to streamline and reduce costs, can help a business become much more profitable.