Phase I: Background and Benefits
All the questions you would expect us to ask and the information you know we will need to complete our preliminary evaluation is gathered in this phase. This work is our investment in the long term success of the project.
We obtain business history, financial performance reports, organization structure, management experience and, and most importantly, management's view of business issues and performance goals.
This work takes about a week depending on how readily available the information is we need and scheduling time with key management.
Before continuing with the detail of how our clients achieve significant growth in revenue and profits, the following is a summary of the most common areas where we assist companies in achieving improved business performance:
Management System: We teach and coach management to follow a structured process for running the business that is based on key data sets of information being available daily, weekly and monthly along with set times and specific agenda to review and act on this information. This process results in the top 20% of the activities that drive performance in every business receive 80% of management's attention. Yes, the 80:20 rule is alive and well. The management system is the anchor for achieving the near term and longer term improvement in sales and profits. The Profit System facilitates that process.
Sales Growth: we are strong advocates of maximizing the lifetime value of each customer. We are very successful with our sales and gross margin building programs.
Cash and Liquidity: We hope your business is the exception and has accurate and timely information on your cash and liquidity position. If so, then our process will further strengthen that so it is linked to every key decision made. If you do not have the information needed when needed, we help improve this portion of your control environment. If necessary we assist with sourcing financing or other means of capital infusion. We have, at times been the primary contact for key vendors in those instances where their cooperation is needed while the business is strengthened. The work we do and teach your team, strengthens cash and liquidity.
Asset Management: The largest current asset for many companies is inventory. As you already know, inventory management and control is key. We evaluate all phases of inventory management from planning, sourcing, sell through rates, and gross margin contribution at the detail level. If you have manufacturing operations we start with what sells and roll that back through the production planning, material sourcing and actual production process. We often find established procedures to be sound but often not followed and people not consistently held accountable. Inventory turnover, realized gross margin, production to correct standard and more improves from this work. Of course our program addresses credit policies, collection practices, accounts receivable aging, and days outstanding. We almost always find procedures in this area lacking and inconsistently followed.
Expense Management: There is no single line item of expense that we can say always is a problem. Each company has its areas of opportunity. The analysis with your assistance will always identify expenses not rationalized and then we will establish action steps to fix those and control procedures to prevent their recurrence. It is not unusual for the total expense structure to increase. So how do we improve profits if expenses increase? Well it is the mix that changes. Money wasted is stopped and where investments are needed to achieve performance goals they are made. We find this most often where a company's talent needs strengthening.
Employee Performance: We evaluate how your company hires, evaluates and motivates your staff. Often organization charts and job descriptions linked to company performance objectives are out of date or non existent. It is not unusual for some people to be identified as not performing as a result of this process. Our posture is to coach and train those people. Of course in some instances they need to be replaced. When that happens with a person in a key position, we assist with the recruiting process so you learn how to have the best chance of hiring the best candidate for the job. The result of this process is improved performance, productivity and faster contribution to achieving business performance goals and objective.
On Site vs. Offsite: Our program is very flexible. For larger companies we find that one or two days on site each week is the best answer as it allows us to be most effective considering the dynamics in place with a larger management group. For smaller companies we are often able to manage the project using phone, email and soon to be introduced on-line video training.
Management Resources: We find every company has qualified, dedicated people. The ownership of every company where we work a project is very experienced and the business expert. It is not unusual for us to supplement the financial staff on a part time basis as some of the project requirements can be burdensome until they are properly trained. Smaller companies have requested us to assist them on a go forward basis as a part-time CFO and we assist or help find a qualified person to fill that role.
Systems: The reliability of technology in companies is very inconsistent. Some clients have sound systems and system procedures in place. Other are at great risk. Profits are at risk if data does not flow as planned and/or the integrity of data is compromised. We review this area and work with you on the required solutions.
Summary: The process we work though with you and your team results in higher profits from effective asset management, expense rationalization, improved productivity of employees and higher sales. It is not unusual for the rate of profitability to more than double in 90-120 days. We target the benefits in Phase 1. We will be in agreement as to what they are, you will have a copy of our detailed work plan along with performance milestones. We will review progress with your weekly. There are no secrets to this process and results.
Phase II: The Full Service Profit System Work Plan
Introduction: Our detailed work plan is directed at achieving the benefits forecasted during Phase 1. The following is presented in the context of a complete consulting process. Where we are engaged for specific purpose projects, a work plan is also developed for that limited scope work. For example, when we assist with the acquisition or sell of a business, merchandise inventory and control review, or one of the many other special service assignments we are qualified to complete, a special purpose work plan is developed and coordinated with management
Cash and Liquidity Position and Forecast: This is our starting point. We measure where the business is today and where it is likely to be each week over the subsequent two months given known conditions. The results of all other work we do is tracked in terms of its impact on cash and liquidity.
Financial Performance: Information needed to track business performance is defined and developed if not readily available. The issues we normally encounter is timeliness of data and often all the detail that is needed in the business is not captured at all.
Business Performance Analysis: Using financial data we work to understand realized margin and the components of gross to realized margin. We link this analysis to our expense evaluation since some companies do not have certain items categorized correctly. We want to make sure we all grasp the cost of operations the costs associated with products sales.
Note: at this point we will have focused on structuring of the information needed to evaluate business performance. It is common for issues to surface or management's suspicion of issues to be confirmed.
Asset Management: We quickly address the most significant assets for the company. Our approach is to start with what is known and move on from there. In the case of inventory, the issues most commonly addressed are inventory turnover and realized gross margin. Of course there is often a lot of work involved in analyzing category and item performance. You will find we focus most of our time and attention where there is the greatest investment and potential for profit. As we work through the process you learn the logic steps and will ultimately extend the work we started into less valuable but still important areas.
Many companies are a cash and credit card business. In those instance where accounts receivable material we review and establish as necessary accounts receivable management procedures. This starts with credit policy and moves on to collection procedures.
Important: It may appear that each of the work plan steps is completed in sequence. Actually, many steps are initiated within a narrow timeframe at the start of the consulting project. The number of work plan areas that can be started is generally directly proportional to the size of the company. For example a large retailer with a full compliment of staff at the central office can possibly be working on four or five areas at one time.
Sales Development: This area can take some time since most companies do not have a great customer data base and marketing alternatives need to be developed and tested. For companies having retail locations, certain proven techniques on the sales floor including sales targets by sales associate, recognition awards, in store meetings and more, can be implemented with noticeable positive impact quickly. Other techniques including, developing wholesale sales management system, direct response marketing campaigns, signage, store positioning, internet marketing can take longer. However, the payoff from a rational approach in this area is huge. It continues to amaze us that most retailers do not use what is available to them.
Human Resource Management: The work in this area is always interesting. You can count on some people in the company feeling threatened by the process. Most others will quickly get on board because they will see how their job is tied to the performance goals of the company. We work with you to develop clear lines of functional reporting, job descriptions that include clear statements of responsibility and accountability, a defined review process including timing and performance linked to company results.
Throughout this process we have regular informal and formal reviews to track progress. As we discover positive opportunities or issues requiring the attention of management, they are communicated. We are very open about what we are doing and the status of the project.
Other Areas: Depending on the business, work can be structured in one or more of the following areas:
Real estate management: the process for site selection, lease vs. buy, sale leaseback, closure on the deal, store opening process including promotion.
Debt Compliance, Debt Restructuring