Unabashed pursuit of profit

Enterprises exist for profit, which is a familiar truth to everyone. However, in day-to-day operations, too many problems and things make people lose their true direction. Not to mention, there are so many distractions from the latest "new" management theories and ideas. In fact, as the manager of the Kimchi Company in the article sees: "There are only a few things that are really important in each enterprise." The core of these things is to make profits, to make profits without scruples and diligently, and to get cash. profit.

�[In any struggling company, you can hear the statement: "We are trying to get a contract. Just take this order and it will definitely increase the company's cost. Less bottom line income."

"Since the old man retired, his children have really added a lot of modernity to the company."

"Our goodwill is very good, increasing These other services will greatly stimulate sales."

"We have pioneered this new industry."

The desire for quick success to increase financial statement earnings is the biggest cause of tragedies in the business world . At the end of the day, the bottom line gain is nothing, because there is a long list of nasty, annoying, and painful costs before calculating the final bottom line profit and loss. Along the way, they devoured each set of numbers bit by bit, and by the time the profit was finally calculated, there was virtually nothing left.

This fact is especially true when you are struggling to get new business or huge sales. It is difficult to raise prices by striving for it, which means diversifying resources. Therefore, the so-called striving from the beginning is to increase expenses and reduce gross profit.

It is unwise to try to be bigger instead of better. Commit to being good, and you will grow up without a doubt. But simply going for scale will only make you bloated, not bigger. You'll become more common and more likely to be wiped out, because in the process you'll usually lose what kept you alive. Remember, the primary function of a business is to make money, not spend money. The more you delay making money, the harder it is to solve the problem. Don't be too lenient with your business, here are ways to help you achieve results.

Driven to Cut Costs

One company was founded because it worked tirelessly to cut costs. The company was called Price-Club (a discount club, now called Costco). The company was founded by two people with very different backgrounds but with the same philosophy. Their philosophy is to keep cutting costs.

The discount club cuts out middlemen, salespeople and redundant packaging. In fact, it is a big warehouse. Customers self-purchase large quantities of goods, resulting in huge discounts. For example, Home Depot's no-touch pantyhose sells for $25 for a pack of 10 at a discount club if (and only if) it is available at the discount club. This approach works and is a win-win.

Reduced packaging at the discount club saves suppliers a lot of hassle, which can lead to significantly lower prices. If the supplier refuses, such goods will not be accepted. Therefore, customers always have a joy of discovery in the buying process. Maybe what you want isn't always available, but when it's available, it's a great deal. This works so well that there are no inventory fees at all for the markdown member store. If the product is not followed by an order, it is usually sold out within a few weeks. Vendors usually come to collect payment within 30 days, and most items are sold out within 15 days.

Discount clubs start selling membership cards at the same time they enter a town, so the funds can be used to pay for the store's construction first. What's more, the company's annual reports are still produced on average photocopiers, even after the company turned its early investors of $2,500 into billionaires. The general manager's office also retains the bookshelves he used when he was a student: two wooden boards are supported by bricks.

This case tells us that any savings can't be said to be insignificant, and it sets a benchmark for us. Getting the best price is always the most exciting thing. Therefore, cutting costs should be the greatest way to develop the market today.

An effective cost-cutting method is to create a new committee each month to think about different ways to reduce costs. The committee is made up of employees from different departments. Give them a dedicated time to come up with the 5 most important cost reductions possible within 30 days and publish their recommendations. All recommendations actually adopted will be posted on the list together with the names of the committee members who made the recommendations. At the end of the year, 20% of the money saved in the first year is distributed to committee members.

Avoid computer traps

Computers are great when used properly, such as airline bookings, financial statements, spreadsheets, banking, and word processing. However, when Lotus-1-2-3 sold its 20 millionth set of spreadsheet tools 20 years ago, it was a sign that productivity had fallen. Any society with 20 million people working on spreadsheets is doomed because someone has to build cars, cakes, or electricity. There is no need for everyone to make measurements or forecasts. On the other hand, email is a good counterbalance to this trend by enabling quicker decision-making and fewer meetings.

Some automated tasks make people think less. Back in the backward 1970s, several Honeywell managers were having a cost-benefit discussion about an upcoming projector. Everyone was enthusiastic. The two sides hold their own opinions and refuse to give in to each other. Faced with two product models, they are busy with pros and cons. Some support a machine that retails for $99 and sells 50,000 a year; another group insists on a $149 machine that sells just 25,000 a year.

Why argue? Because they have to make a decision before finance can take over. There is no time for a detailed speculative analysis. Once it was decided, the finance department had to spend a long two weeks compiling a report by hand with the most probable unit sales and the most probable production costs for each price. If possible, imagine what to do with this manual report.

Now things are very different. Every manager has his own computer. Spreadsheet software is available on most machines and can instantly generate a report for you. If the returns are not ideal, just modify the assumptions slightly: use keyboard magic to increase sales or reduce costs until you get a satisfactory return.

If you really want to free you and your organization from the ravages of computers, you should stop buying more computer gadgets and use a system you've had for a year. Ask your employees not to add hardware and software that seems to strengthen your business when they buy you a PC. Just wait and see, the price will be lower next year. Maybe you are lucky enough. One of your opponents is busy trying to correct his mistakes.

Watch Your Cash Flow

Founded in 198_9, Accucorp became profitable the following year. By 1992, sales had exceeded $4 million. "We make money every month," Dr. Pamela Coker, founder and CEO of the company once said. "The most interesting thing is that if you make money every month, it turns out to be profitable every year."

At the company The main office building, with a large chart, is the most popular place for the company. The table is updated daily with the current day's cash collection status. It has attracted much attention, and employees often come to check it and discuss it. This way, everyone has access to important information. Here, receivables are seen as nothing more than a market-testing fee until they are paid. If payment has not been received, the sale is not considered complete, there is no customer satisfaction, and of course no commission is paid.

In Accucorp, there are two main functions to quickly recover the sales payment: one is to store the cash back in the bank; the other is to quickly find the problem. This kind of strong payment recovery works very well. The enthusiasm of every employee, especially the salesperson, has been mobilized.

Focusing on cash position can be very useful for a company. One way is to keep an eye on recycling. High receivables and inventories are a sign of problems. Yes, although the balance sheet treats both receivables and inventories as assets, which is wrong. We should treat them as liabilities. The problem is even more apparent if receivables and inventories are increasing.

Also, don't count borrowed cash as cash inflows. Orthodox financial accounting is defined this way, but it's a short-term thinking. Only the recovered sales revenue is the only real cash inflow. Everything else is temporary, or worse.

Managed on a piece of paper

Robert Vlasic owns and manages a car rental company, a nursing home, a real estate company, and a pickle company. "I have a rule that every company will give me a one-page (only one-page) report every week." He said, "This kind of communication is very important." In his view, each company only has A few things really matter. If these things go well, the rest will follow.

The Kimchi Company report reports the number of kimchi shipped for the week by kimchi category. The report reflects the total sales amount, gross profit, and labor costs for each factory. It also includes management, labor, and overtime rates paid by each factory, as well as weekly and quarterly comparisons.

The kimchi business is developing rapidly, while other businesses are relatively stable. Generally speaking, rapid development usually causes loss of control. However, Vlasic did his best to keep it concise. His product line is wide, with a total of 73 products, including hors d oeuvre, pickled cabbage and pepper.

The trick to Vlasic management is to manage through a sheet of paper. This captures the point nicely and avoids distractions. Everyone focuses on the things that matter most: pickle shipments, overtime hours, and prices.

Of course, you can manage a company based on financial statements. Still, it's like standing in the stern and telling the captain how many rocks you've avoided. If you need forward-looking reporting, try to get your manager to use a piece of paper for the management report, which eliminates all the unimportant details. Generally, the report on this sheet includes such things as: shipments, backorders, cancellations, and payroll expenses.

Much of the financial data is retrospective. Therefore, you should add some forward-looking data, such as customer credit, rate of return, customer feedback, or the number of customer calls that can help you understand the market. Of course, product development should also be added, keeping one eye on the vision.

Watch for signs of crisis

There are many ways to spot a crisis before you see it through your financial statements. For example, if your parking lot is empty by 7pm, you have a problem. If you have better relationships with vendors and the media than with customers, there is something wrong.

Pay attention to high wages and low bonuses, increased inventories, first-class business trips, managers' offices that are always closed, office buildings that are repainted and outdated machinery and equipment, and administrative staff that are always open at noon Small stoves, close contacts with industry associations, etc. If you see lavish PR campaigns, big charitable spending, lavish R&D spending, and boasting of scale while talking about profits, there must be something wrong.

Here are some ways to avoid problems:

In the face of a downturn, don't rely on changing your company logo, making acquisitions in other areas, or adjusting your accounting methods. response. The real problem should be solved first, and then this whitewashing work should be done.

In accounting, inventory, goodwill, and receivables are considered assets, but they are not. It's only an asset if the grocery store next door to you accepts these as cash. These things do not generate contribution income until they become cash. Earnings increase only when goodwill, receivables, and inventory fall. There is no perfect accounting year, no best place to work, and no perfect office furniture. It's definitely going to cost money to change things up and down. If you don't have three years of real earnings growth, don't touch the hype.

If you are eroded by a competitor, you will soon be out of business. So it's useful to put some effort into this. Take drastic action now. It is extremely dangerous to do a side view. Raising prices by 30%, closing one or two factories or seeking other suppliers are all worth considering. Make decisions in one day. Don't expect the status quo to get better, it's impossible. Sitting around and waiting for things to get worse won't make you any wiser.

The only purpose of doing business is to create more profits, that's all. Without profit, those warm and vague ideas can only be a pillow. So, unabashedly keep pushing for profit!

Originally adapted from The Six-Month Fix: Adventures in Rescuing Failing Companies by Gary Sutton with permission from publisher John Wiley and Sons, Inc. The author registered copyright in 2002. Published by John Wiley and Sons, Inc. All rights reserved.
Author Gary Sutton has served as "turnaround president" at companies including print, software, retail advertising, aerospace manufacturing, and online data storage.