Business Fitness: Prophet or Profit? Part 2
A business makes a profit through associates’ hard work together with a clear vision and impeccable communication.
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“The only thing worse than being blind is having sight but no vision.” — Helen Keller
Last month, I left you with the challenge of being a prophet of your profits with more confidence. We talked about how to better manage variances in projected and actual results in very simple terms.
Mea culpa to those who passed Cost Accounting for the first time.
In addition, I threatened to share additional pointers to guide your profit prognostication. This month, I intend to follow through!
A Quick Level-Set on Profit vs. Prophet
Let’s start with a refresh.
- You have developed a clear and concise company vision statement that encapsulates where the company is going and when you expect to get there. Remember, this statement must paint a picture of your mission that motivates the team to “buy into” where you are headed. This is not an easy task but remember this: You don’t carry this load by yourself. You can recruit your department heads and even a few respected employees who are opinion leaders to help develop this statement. When you share this vision with the entire company, the rank-and-file will be closely watching their managers and peer leaders’ reactions. You are aiming for nods, not shrugs.
- If you understand how each associate will process what you share with them, it lays the groundwork for a great communication culture. This is the key to your success and, even more, to your managers’ success. Good communication builds trust in management and between departments. This is the glue that enables real teamwork and creates the “oneness” that delivers your competitive advantage. The DiSC tool and a little application training enable this advantage.
Making Money and Losing Money
Profit discipline is enabled by teaching your management team and associates how the company makes money and how it loses money. A basic Business 101 training session will help everyone appreciate how their choices and actions impact the business.
If team members don’t know the ABCs of basic business, it can appear that all management decisions are motivated by the profit the owners keep and won’t share. I’m not suggesting you share details of your finances; the big picture will suffice. An example may help clarify.
- Suppose a manager says, “We need more people.” When consulting, I respond with this question: “How much additional revenue and profit are needed to hire this additional person?” This builds upon two things: Business 101 and a commitment to performance/results. The answer to my question depends upon the role and the compensation. Let’s look at a technician as an example. Wages + healthcare costs + benefits package + truck + training + tools + initial learning curve (low productivity time) = how much money the company will invest over, say, a year. Share this with the requestor suggesting hiring an additional person. Encourage them to start thinking a bit more like a businessperson. Everything must be funded by current revenue, cash flow and profits.
- That then leads to the next question: “How much additional revenue will be needed to finance this additional person?” Well, if your gross margins are 40% and your net margins are 15%, you will need about $400,000 to $500,000 of additional revenue, minimum. Will adding this person cover the spread? Remember, I’m not an accountant…but you get the idea. If the upside of efficiency and revenue opportunity are there, then pull the trigger.
- That department manager then has a clear picture of expectations for delivering measurable results with the company’s investment in personnel.
Working Hard Together
A business makes a profit through associates’ hard work together. The more completely they embrace a clear vision and communicate with one another, the sooner your prophecy of success and profits will become a reality!
“The challenge of every team is to build a feeling of oneness, of dependence on one another because the question is usually not how well each person performs, but how well they work together.” — Vince Lombardi
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About the Author
Paul Boucherle, SSI Contributor
Paul C. Boucherle, Certified Protection Professional (CPP) and Certified Sherpa Coach (CSC), is Security Sales & Integration’s “Business Fitness” columnist. A principal of Matterhorn Consulting, he has more than 30 years of diverse security and safety industry experience including UL central station operations, risk-vulnerability assessments, strategic security program design and management of industry convergence challenges. Boucherle has successfully guided top-tier companies in achieving enhanced ROI resulting from improved sales and operational management techniques. He is a charismatic speaker and educator on a wide range of critical topics relating to the security industry of today and an accomplished corporate strategist and marketer whose vision and expertise in business performance have driven notable enterprise growth in the security industry sector.
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