Phil Friedman

4 years ago · 4 min. reading time · visibility 0 ·

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Five Ways to Improve Your Small-Business Profits... Now (Pt. III)

Five Ways to Improve Your Small-Business Profits... Now (Pt. III)RL EYREEIVAT TSR

CLUNDER-UTILIZATION OF SKILLED LABOR RESOURCES IS A MAJOR PROFIT-KILLER IN ANY SMALL BUSINESS OPERATION…


Preface:  This is the third installment of a serialization of my upcoming eBook, "Small-Business Primer: Real -World  Tips for Starting and RunningYour Own Small Business". 

Subsequent installments will be published at irregular intervals over the next year. Should you not want to wait for the serialization to run its course, details of how to secure a copy of the book in its entirety will be found at the end of this article.

The "case studies" cited in this series generally involve the reorganization and expansion of boatyard operations which I've undertaken over the last decade of so, as part of my core consulting business. Keep in mind, however, that the suggestions outlined here are equally applicable to just about any small-business operation that sells products and/or services.


Large businesses with fluctuating sales and workloads can often afford to pay wages to keep idling skilled labor available in the event of a sudden upswing in workload...

Improving small-business profit... now

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But in a small-business context, retaining skilled, experienced people you don’t need, but don't want to lay off during slack periods and thereby risk losing, never leads to any good.

The indicated which enables you to level-load your skilled labor pool throughout the year. Even if you have to take in some of this work on a strict break-even basis.

Level-loading or as close an approximation as practical works in two ways to protect and enhance profits: 1) Level-loading reduces the wages paid out not only for non-productive work but also for non-productive non-work. And 2) level-loading often reduces overall labor payroll by minimizing the need to add extra labor at peak times ―  by flattening out, to a large extent, the peaks and valleys of the annual labor outlay.

Unfortunately, while level-loading is highly desirable for improving profit, it is not always easy to achieve.  At least, not without some help.

In this case, help comes in the form of promotions that encourage customers to order and schedule work during what are historically slack times for your skilled labor force. Here are some possibilities:

A while back, at a boatyard I was helping reorganize, we offered winter layup and storage customers discounts for ordering engine oil and filter changes immediately after fall haul-out, rather than waiting for the approach of spring launch.

Over and above offering a price break, this practice actually makes sense for a customer, since one of the reasons to change oil is to remove the chemical contaminants suspended in the used crankcase oil.

A built-in benefit was that, If a customer was going to change his or her oil at spring launch anyway, it only made sense to have the used oil, with its suspended contaminates, drained and replaced with clean oil before leaving the engine to sit idle for months.

Customer resistance to doing something like this comes from either a lack of understanding of what is involved or a reluctance to spend the money well before the services involved are needed.

So you’ll likely have both to educate and offer a monetary incentive.

Text Copyright © 2017 by Phil Fnedman — All Rights Reserved
Image credits Phil Fnedman, Google Images. and FreeDigitialPhotos net

In the latter case, consider that instead of offering a discount for having the work performed earlier than it might otherwise be scheduled, it might be more cost-effective for your operation to hold the bill, interest free, for a couple to three months. The few points it might cost to carry that bill interest free for e6 or 7 months will very likely be less in total than what you might have given away in, say, a 10% or 15% “early-bird” discount.

Along the same lines, a program to hold a portion of major bills, at no interest, for payment in 90 to 180 days. This will encourage customers to order well in advance of the date projected when the work will need to be completed. And the financial benefits of helping to level-load your skilled labor will likely more than offset the cost of carrying such receivables for the 90 to 180 days.

There are, however, a couple of important points to keep in mind, if you opt to take advantage of such promotions...

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1) You need to stick firmly to the schedule of discounts, or the gambit will quickly lose its credibility and, consequently, its effectiveness in the long run if customers learn they don’t really have to order early in order to earn the discount.

2) Any discounts have to be offered with the explicit proviso that you are not obligated to perform the work at any specific time, except perhaps that you guarantee to be finished by the time the discounts run out. This maximizes your flexibility in terms of scheduling and level loading your skilled and experienced labor force.

If you run the numbers, you'll find that in virtually every scenario, level-loading pays such large dividends that the relatively small concessions you have to make in order to achieve it prove to be more than worthwhile, profit-wise.    Phil Friedman


Postscript: This is an excerpt from my upcoming eBook, Small-Business Primer: Real -World  Tips for Starting and Running Your Own Small Business. For information on securing a copy, email  phil@portroyalgroup.com and put "small-business book" on the subject line.


Author's notes:   If you found this article of value, you  might also want to look at some of my other writing about small business operations, management, and marketing:

"Five Ways to Improve Profits... Now  (Pt. I)"

"Five Ways to Improve Profits... Now  (Pt. II)"

"Common Myths About Starting Your Own Small-Business"

To receive notifications of my writings on a regular basis, click the [FOLLOW] button on my beBee profile. Better yet, click [Subscribe To This Blog by Email].  As a writer-friend of mine says, you can always change your mind later.

Feel free to "like" and "share" this post and my other LinkedIn articles — whether on LinkedIn, Twitter, Facebook, or Google+. I ask only that you credit me properly as the author, and include a live link to the original work.

If you are interested in yachts, are allied with the yacht building industry, or operating a small business in another sector, you should consider joining my beBee Hive,

THE PORT ROYAL GROUP for Yacht Builders, Buyers and Owners

where you will find experienced industry professionals discussing a wide range of topics. The ongoing conversation is always interesting, informative, and 100% industry insider.

Finally, If you would like to discuss marketing, management, or other issues you face in your efforts to join the ranks of small business, email me at phil@portroyalgroup.com to make an appointment for a initial telephone consultation at no charge. email or message me to arrange for a free, no-obligation, initial consult.ecmail or message me to arrange for a free, no-obligation, initial consult.


About me, Phil Friedman:   With 30 some years background in the marine industry, I've worn numerous hats — as a yacht designer, boat builder, marine operations and business manager, marine industry consultant, marine marketing and communications specialist, yachting magazine writer and editor, yacht surveyor, and marine industry educator. I am also trained and experienced in interest-based negotiation and mediation. In a previous life, I taught logic and philosophy at university.


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#SMALLBUSINESS #BUSINESSMANAGEMENT #BOOSTPROFIT #BETTERBUSINESS  #BUSINESSCONSULTING  #ENTREPRENEURSHIP  #STARTYOUROWNBUSINESS


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Comments
Phil Friedman

Phil Friedman

4 years ago #10

#8
Thank you, Gert, for reading and commenting. In this series, I am trying to present practical steps for improving profit in small businesses that are relatively easy and low-cost to implement. I am not sure you will agree (actually I think you will) that although these tips are not atomic science, they can potentially have a major positive impact on small-business profits -- whether you're in South Africa or New York. Cheers!

Phil Friedman

Phil Friedman

4 years ago #9

#7
Thank you, Ali, for reading and commenting. Unproductive workers are always a drain on profits. Cheers!

Gert Scholtz

Gert Scholtz

4 years ago #8

Phil Friedman I find this a very clever way to improve working capital, cash flow and profitability; both in level loading labor, and trading off short term interest and discounts to customers. Best of all it provides additional value to clients. Thanks for this Phil.

Ali 🐝 Anani, Brand Ambassador @beBee

A skilled labor that is sitting idle is as good as the business doesn't have this worker. A very comprehensive and diagnostic buzz Phil Friedman. Sharing

Phil Friedman

Phil Friedman

4 years ago #6

#5
Thank you, Renee, for taking the time to read and comment... and for the kind words. In my consulting practice, I often tell prospective clients that the reason I can help them avoid problems is not that I am so brilliant, but that I've already made every error that they're likely to make and so can help them avoid those pitfalls. Cheers!

Renée 🐝 Cormier

Renée 🐝 Cormier

4 years ago #5

Excellent advice! There's nothing better than being able to benefit from the experience of others. Thanks, Phil.

Phil Friedman

Phil Friedman

4 years ago #4

#3
But there are, Kevin, slower periods as well as high sales periods for custom software firms and value added retailers, and nothing is worse that when you make a lot of sales promises then have to scramble to figure out how you are going to fulfill the orders. Thanks for sharing and commenting. Best. And cheers!

Kevin Pashuk

Kevin Pashuk

4 years ago #3

There is a reason I am in IT... there is never a slow season. But your advice is sound. It's near impossible to keep good staff if you do not provide a measure of security.

Phil Friedman

Phil Friedman

4 years ago #2

Thinking that some of my biz friends around the world might find this of interest, Donna-Luisa Eversley

Phil Friedman

Phil Friedman

4 years ago #1

Thinking that perhaps my Canadian biz friends might like this... Jim Murray.

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