As its Christmas, I thought I would keep the flavour of the month and base my advice on the song the 12 days of Christmas! My brief is to give you some ideas for improving your profit margins.
As one of Simon’s oldest customers, not only physically, but also in length of time I have worked with Simon, I have heard him mention the 5 ways a couple of times!!!! But joking aside, this is the backbone to improving your business; you just have to find out for yourself what you can take from each of the 5 ways into your own business to improve it.
These are items that have and are working for us – each of your businesses are different, and some may not apply to you, but hopefully something will trigger and you will be able use at least one of them.
I mentioned to my dad who started LGDavis, and who still at nearly 84 likes to hear how things are going (well he really only likes to hear the good news!), that I would be giving a brief overview of
how to improve profit margins, he laughed and said – ‘it’s not rocket science – just put your prices up!’
So starting today, with my dad’s advice -
My partridge in a pear tree is - increase prices. I know many of you will be reluctant to do this, but try it. I know for our business it is very hard. My dad came from a generation without the internet to check every price out, but if you have not put your prices up for a while do try, test and measure.
2 Turtle Doves - 2 x new eco friendly cars. We have 7 vehicles and we looked at what we were spending on fuel. By purchasing the new blue motion cars we doubled the miles per gallon we achieved. The saving on fuel alone pays for the hp on purchasing the new vehicles, and we have also reduced the cost of road tax, servicing and repairs - the added benefit that the sales guys get additional money in their pocket as half the p11d value.
3 French Hens – efficiency - productivity - time management – As a manufacturing printer who has been in business for 50 years, we found that by analysing what we had always done, with new technology and some critical questioning in every area we could smarten up our processes. This has been reinforced by our drive to become ISO9001 accredited. We are by no means lean yet, but we are constantly working to improve our workflow through the company, to speed up turnaround times.
4 Calling Birds – At one time, staff had the autonomy to buy what they needed within reason – but now the staff need to call upon the management team to authorise purchases. In order to get approval they need to demonstrate the need and the benefit to the company and that they have negotiated best value for money.
5 Gold Rings- Just as people are realising the value of their redundant and out of date gold jewelry, we looked at what we had accumulated over the years and have sold off what we don’t need. Our redundant items of machinery, our obsolete customer stock – we hold stock for many hospitals at our own cost, and we have done an exercise to look at what items they no longer use, and asked them to pay for them so that we can destroy. Excess paper, what we have not been able to use up and sell, we have given to schools part of our pledge to give back to the community, freeing up space. Furniture, we have sold unwanted desks and chairs. We assessed how much we use our spare van and decided it was only used for smaller urgent items, and this can be done in one of our cars, so we got rid of the van and its ongoing costs.
6 Geese a-Laying – It’s no use the geese laying the eggs if you stamp on them, just as it’s not good us producing work that is wrong. We have striven to ensure the jobs are right first time – we have introduced non conformance reports and look each month at areas of weakness, where improvements need to be made, so that the cost of non conformances reduces. We have also improved our quality checking with signatures throughout the manufacturing processes – giving every person who works on the job ownership of their own process and signing to say they have done it accurately.
7 Swans a-Swimming – The swans swim round so serenely, while their legs work like mad beneath the surface. We wanted to ensure we had plenty of stock of paper etc giving us a smooth even work flow, but if this paper was not used in the same month, then cash flow would hit us and we would be paddling frantically. Working with our suppliers to ensure we receive next day early morning delivery, we can still achieve a smooth work flow and we only purchase what goods are going to be used that specific month – thus aiding cash flow.
8 Maids a-Milking – We need to ensure we are following the previous points of the five ways, and ensure we are ‘milking’ our clients efficiently. We have needed to work on our data base and cleanse. In 50 years in business you can accumulate lots of data, but this will only work for you if you spend time each year ensuring the data is up to date and accurate, giving you a better return on your marketing activity.
9 Ladies Dancing - We don’t have 9 ladies in our accounts department, just the 2 and they really don’t have time to dance! We have tasked them to ensure all our sales invoices go out each day. We have worked on getting more customers receiving invoices and statements by email, reducing costs in printing (bad news for me if all our customers do this); the cost of post: the time taken for invoices to arrive; reduction in invoices/statements lost in post; benefit to the environment. On the creditors side we now also pay our suppliers by bacs (Bankers Automated Clearing Service), reducing our banking costs (bacs payments are much cheaper than cheques), the postage of the cheques – we can no longer say the cheque is in the post, but then we wouldn’t have anyway.
10 Lords a-Leaping – Try to get your suppliers leaping through hoops for you. Check every overhead and cost of sale invoice and ensure we are getting best value for money. Look at your 10 areas of top spend whatever size of your organisation and see if you can negotiate better deals. Tender out large costs such as gas, electricity, telephone, accountancy, insurance – the first year we did this we saved nearly £10,000 on our insurance, we had always used the same broker and we did a costing exercise to double check and made this saving – you can always ensure that you are getting best value for money for print and office products by letting L G Davis price them up for you!!
11 Pipers Piping – We decided not to have our pipers piping, or rather printers printing on overtime. We reduced overtime throughout the company, encouraged the staff to bank their time in busy periods and then take the time off when quieter, to reduce the costly overtime rate.
12 Drummers Drumming –Do you need 12 drummers drumming? Reduce the team size. Not popular especially at this time of year, but we have had to look at not replacing when people have retired, encouraging people to take voluntary redundancy and in a couple of instances, where jobs are no longer really necessary, we have had to make those very difficult decisions. That’s all from me, but I hope you have found some of it useful, and as Simon would say, if you have to go back to your business and put the ideas that could work for you into action.