Monday, June 8, 2009

Increasing Profit, One Penny At A Time

Let's face it. We've entered some very tough times around the entire globe. Profits in tough times can be enhanced with reductions in overhead.

The initial lens to assess overhead is the customer's. Classify expenses that contribute to the customer experience and those that do not. Obvious examples of the former would include store signage and merchandising strategies. An expense that would not enhance the customer experience might be an expensive subscription service to a specialized newsletter that comes month after month that everyone stopped reading a long time ago. If you look around your store or chain, you'll find many things that may be reduced or eliminated to cut costs without compromising the customer experience.

Here are some examples:
  • The watering service that comes weekly to water your plants in the stores and the office
  • The collection of subscriptions to trade magazines and newsletters that no one bothers to read any more
  • The delivery costs you pay for to get your office and store supplies delivered
  • Your courier account that everyone uses for all those emergencies
  • The high premiums you pay on your company vehicles because of your low deductibles
  • Hiring professional painters to paint the staff area when perhaps some employee or employee's spouse can paint it for a third of the cost
  • Equipment that racks up unnecessary electrical expenses such as the shipping terminal that's on all the time, the terminal in the manager's office and the stereo system that runs all night after the store is closed
  • The window washing service that could be done by a staff member in 10 minutes
  • Buying a new printer cartridge for $45 every month when you can refill the current one up to 20 times for about one quarter of the cost
  • Adopting a cheaper third party long distance service to replace the pricy one attached to your current phone
  • Evaluating your current store cleaning schedule and changing the frequency to cleaning every other day and carpet cleaning to every 6 weeks instead of monthly

Opponents to trimming costs can rationalize that every expense enhances the customer experience. Today's retailer can trim many expenses like the examples outlined that really don't affect the customer experience directly. What does it all mean?

It means that in these tough times, a little extra effort by everyone on your team can go far to trimming unnecessary expenses without compromising the customer experience or the motivational level of the employees. Trimming those trivial expenses that have crept in over the years can help ensure survival and prosperity in these tough times. In the short term you’ll see an immediate improvement in your bottom line profitability with no negative impact on revenues or the customer experience. In the long term, your business will operate more leanly and provide positive incremental profitability on an ongoing business as wasted overhead is permanently removed from the business.

Take Action Today

  1. Develop a list of those unnecessary expenses that have crept into your business at all levels
  2. Brainstorm with all staff and build a prioritized list of expenses that can be eliminated; focus on big rewards and ease of implementation in your prioritization exercise
  3. Offer rewards to staff that suggest additional unnecessary expenses that can be eliminated thus improving the bottom line; be careful to emphasize that the cuts cannot negatively impact customer experience
  4. Get staff to put in the extra effort when these expenses are eliminated by setting an example yourself. Roll up your sleeves!

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