What’s Your Profit Strategy? November 27, 2009Posted by David Dirks in business strategy, Management, Solving Business Problems.
Tags: business strategy, David E Dirks, dirks on strategy, Management, managing expenses, profit strategy, profitability, small business strategy
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The headline from a recent article in the Wall Street Journal: “PSA Chief Unviels Profit Strategy”. It seems that PSA Peugeot (the car maker), reeling from the car industry woes, is about six percentage points below the average operating margins of five of its best competitors. The new CEO has declared that 55% of his project increase in profits over his 3 year plan will come from general cost cutting. The balance of his estimated increase in profits will be generated by increased sales in high growth markets and better sales performance in Europe.
I noted a couple of simple things. When a business is in dire trouble from a profit point of view, the 911 is on creating a ‘profit strategy’ that is designed to get a business back on the right track.
How does that profit strategy take shape? If you study profit strategies of companies seeking to climb out of losses and into the green of profitability, you begin to see a few basic ideas:
1. Wringing excess out of the overall cost structure of a business wherever possible. This is typically where the bulk of profit improvement generally comes from. The responses to this strategy run the gamut. Some businesses undertake a slash and burn process without much thought to the what, why, when, where, and how of cost cutting. That results in sometimes creating more weakness in the business by cutting out things that are critical to operational effectiveness the real excess.
The other side of the equation are those businesses that are slow to make the needed cuts that gives them the ability to redirect resources to other key areas of their business. That slow response to incrementally reducing costs over time can lead to a sudden rush to implement draconian cost-cutting measures of all shapes and sizes.
There is no easy answer to how to approach cost cutting as a strategy for managing a business. If you think about it, shouldn’t we always be looking for opportunities to wring the waste from our businesses wherever possible? Companies like Walmart have created a culture of making sure that expenses are always measured and alternatives can be generated to reduce them.
Unfortunately, that’s not how many businesses operate. I was once told that profitability can cover a lot of mistakes. True enough, when times are good and cash flow is everywhere (the good old days!), we can be much more liberal in our overall spend. Sometimes, our businesses can suffer from ‘cost structure creep’. One day you wake up and wonder how you ended up with such bloated pockets of expenses.
If there are any redeeming values for an economic downturn is that it creates an opportunity to manage expenses like we should have done anyway.
2. Selling assets to pay down debt & refinancing short term debt. AB InBev, the firm that bought the mega American beer maker Anheuser-Busch did just that after the merger and the economy created a drag on profits. That strategy lead to a healthy increase in overall profitability despite a decline in overall sales of about 10% worldwide. Getting rid of assets that are not essential and/or central to the core business you are in is always a great way to reduce expenses and, most importantly, re-direct resources to those areas of the business that need it most. In the case of AB InBev, the need to increase sales volume and protect its most valuable brands, like Becks, Bud, and Stella Artois is going to take some additional investment…investment that will come from the increase in profits that can be redeployed for those efforts.
3. Cost cutting is never a substitute for investing in your core business. AB InBev has opportunities to sell more of its Budweiser branded beers in different markets where they have an already well-established marketing and distribution platform. They are also introducing some new beer products like Bud Select 55 and Bud Light Golden Wheat. Those are key strategies and initiatives that require investment in their core business and brands.
Another example would be Chrysler. There is a company that could probably cut costs all day long and never approach profitability. Aside from their auto industry and economy woes, Chrysler forgot (or perhaps it’s last owners, Mercerdes Benz, ‘forgot’) to invest in new products to help it stabilize and maintain market share. Instead, Chrysler now has the least amount of product coming through its business compared to just about any other competitor. Cutting investment in their core business and reducing the percentage of their car line that they replace over time with newer models was clearly not an effective cost cutting tool for them. The result is continual bleeding of profits and loss of market share in an already troubled industry.
4. In times of peace, prepare for war. In times of war, prepare for peace. I’m not sure who said this statement but I didn’t create it. However, it does have immense implications for how we deal with economic upturns and downturns. In times of robust economic growth, particular focus needs to be paid to how we manage our expense structure and how we allocate investments in our core business. When the economy turns sour and if we have been diligent in managing our costs, we’ll have the ability to invest in our core business (creating new products, expanding into new or emerging markets, buying additional market share through acquisition, etc.) when everybody else is scurrying to cut out or drastically reduce costs and investments into the core business.
We’re quick to focus a lot of our energies on the usual suspects of strategy: product, competitive, marketing, sales, and operation. I would also include making an investment in a ‘profit strategy’ as well as an overall guiding influence over all other strategies. A profit strategy should answer to basic questions:
- Where are we going to wring out excess in our business and why?
- What areas of our business deserve additional investment to help us meet our profitability targets?
Both of these questions have implications for the short, intermediate, and long term health of our business.
Strategy: The Paperless Office November 19, 2009Posted by David Dirks in Dirks On Strategy: Episodes.
Tags: business strategy, David Dirks, dirks on strategy, paperless office
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The idea of a truly paperless office has been the subject of many discussions within many different business communities but with very little results to show for the effort. We’re talking today about the so-called, paperless office. It’s a concept that’s been bantered about for many years now. How many businesses do you know that actually operate without a huge paper trial? If you’re like me, you haven’t found many if any that have a truly paperless office. So, I ask you, is the concept paperless office dead or alive? Is it real or a dream? And if you can implement a paperless office, the question of what’s the business benefit begs to be asked.
To help us understand the process of creating a paperless office and the benefits to both the clients and the business itself, is Dr. Mark Driver and the Office manager of Hudson Valley ENT, a medical practice that has actually created a true paperless office and has reaped the many benefits that come with harnessing technology.
Building a Frontline Profit Machine: Podcast November 12, 2009Posted by David Dirks in Uncategorized.
Tags: building profits, business profits, customer service, Frontline Profit Machine, managing sales, profits, sales management, Ziad Khoury
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Note: This is a podcast of a recent Dirks On Strategy show that aired on November 11, 2009 on WTBQ in New York.
The economy is in shambles. Competition for the same consumer buck is global and fierce. But one sales management consultant takes a unique approach to addressing the sole area that requires minimal improvement but can yield tremendous profit growth. Ziad Khoury, with nearly two decades of helping major companies reap profit windfalls, has authored a new book that centers on the frontline – entry level sales positions, call center agents, customer service staff– and shows how the most substantial new revenue opportunities involve those not traditionally associated with sales rainmakers.
“Indirect sales opportunities are ones that tend to be the most overlooked in many organizations,” says Ziad, author of FRONTLINE PROFIT MACHINE: The Blueprint For Exploding Profits with your existing Sales and Service Team. “The positions that offer them are often viewed as entry-level, with little thought to the profit influence they have:” Executives of great companies like Nordstrom’s and Enterprise Rent a Car understand the impact of the Frontline and know what an incredible competitive edge that can be in your business.
Ziad helps turn order-takers into sales professionals and poses the question every company must ask itself, “Will we invest in creating a thriving, nearly matchless service-based sales culture that will give us a leg up on our competitors?”
Turbocharging Your Online Business November 5, 2009Posted by David Dirks in Dirks On Strategy: Episodes.
Tags: AIS Media, David Dirks, dirks on strategy, e-commerce, internet sales, online sales, Thomas Harpointner, web sales
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Thomas Harpointner is a seasoned business executive with over 20 years of sales, marketing, and
management experience. He’s a speaker, author, business strategist and successful entrepreneur.
In 1997, Thomas co-founded AIS Media, Inc., today, an award-winning interactive media and web services company, where he serves as the Chairman and CEO. Under his leadership, the company has emerged as a recognized leader in its field, serving hundreds business clients world wide
ranging from small retailers to Fortune 500 corporations.
Mr. Thomas is frequently interviewed and has made guest appearances on numerous local and national television networks and radio stations including, CNBC, Fox Business News, Bloomberg, The Today Show, and CNN Radio. He’s been published in The Wall Street Journal, Entrepreneur Magazine, Wired Magazine, Forbes, Fortune, and dozens of newspapers, trade publications and web portals.
AIS Media, Inc. develops, deploys and manages world-class applications and services that harness the power of the Internet to help companies successfully drive revenues, cut operating expenses and increase productivity.
Making Winning Business Decisions: Podcast November 5, 2009Posted by David Dirks in Decison making, Dirks On Strategy: Episodes.
Tags: business decisions, David Dirks, decision making, decision making process, decisions, dirks on strategy, making better decisions, Michael McGrath
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Michael McGrath is recognized as an expert in decision making. He created Decide Better! in September 2008, a company dedicated to helping companies and individuals make better decisions. The Decide Better series of books was launched with Decide Better! for a Better Life in August 2008 followed by Decide Better for College in March, 2009.
His newest book, Business Decisions, is the culmination of more than 25 years of advising executive globally, managing one of the most successful consulting firms in the world, launching new businesses, and doing a successful turnaround at i2 Technologies. Released in the beginning of October 2009, it has already received critical acclaim.
Michael has appeared as a decisions expert for CNN International, ABC, and Fox Business. In addition he has done more than 100 radio interviews, presented speeches around the world and been quoted in many articles.
Landing Big Sales with Tom Searcy: Podcast November 5, 2009Posted by David Dirks in Dirks On Strategy: Episodes, Sales Metrics, Sales Strategy/Tactics, Sales Tactics.
Tags: better sales results, big sales, David Dirks, dirks on strategy, large sales, sales management, sales strategies, Sales Tactics, Tom Searcy
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Listen to this podcast of a previous show on the Dirks On Strategy Radio show.
Tom Searcy, author or “RFPs Suck!” and co-author of “Whale Hunting,” is a national speaker, trusted authority on large account sales and founder of Hunt Big Sales, a fast growth sales consultancy and thought leadership organization. Searcy’s primary expertise is working directly with companies and sales teams throughout their big sales “hunts,” helping them to compete and win disproportionately large sales in highly competitive markets. His philosophy and process have resulted in over $3 billion in new sales for his company and its clients.
Before entering the national stage, Searcy headed four corporations, each of which he was able to take from annual revenues of less than $15 million to over $100 million–all before the age of 40. Since then, Searcy has helped more than 100 companies grow exponentially with his proven process for fast growth and company-wide transformation.
In his newest book RFPs Suck!, Searcy shares his rich understanding of the RFP process with companies across the board to help them conquer the RFP system once and for all to win corporate and government contracts.
Searcy’s first book with co-author Barbara Weaver Smith, “Whale Hunting: How to Land Big Deals and Transform Your Company,” was published by Wiley in 2008.
Contact him at: http://www.huntbigsales.com