Monthly Archives: August 2017

How a 10% Productivity Increase Can Increase Profits by 35%

A simple way to increase the profits of a business is to increase employee productivity. Each business and industry is unique, and here are several simplified illustrations to show the impact. The assumption is that if productivity increases by 10%, then sales will also increase by 10% due to extra capacity as long as there is demand for services.

Example #1: A service business that also has product costs, such as a tradesman, landscaper or other service provider that also sells products to a customer.

Example 1
 Current 10% Increase Diff %
Sales          1,000,000          1,100,000          100,000 10.0%
COGS              350,000              385,000            35,000 10.0%
Gross Profit              650,000              715,000            65,000 10.0%
Expenses              500,000              512,500            12,500 2.5%
Net Profit              150,000              202,500            52,500 35.0%

 

Example #2: A professional services business such as a consultant or architect, that does not sell products.

Example 2
 Current 10% Increase Diff %
Sales              750,000              825,000            75,000 10.0%
Expenses              450,000              461,250            11,250 2.5%
Net Profit              300,000              363,750            63,750 21.3%

The big question to ask is how can this be accomplished? Here are 3 ways:

  1. Having the Right Employees: Making sure that an employee is a good fit for your business is crucial. There are traits beyond technical capabilities that you should look for, such as attitude, ethics, loyalty, and energy levels.
  2. Training: A highly trained employee will be much more productive because they will know what to do and how to do it correctly. Mistakes and lack of training cost time and money.
  3. Better Scheduling: Virtually every business needs to schedule their jobs, appointments, meetings, work, etc. Proper scheduling can easily be implemented and yield a very high return with usually little to no cost.

6 Ways to Cut One of Your Largest Expenses – The Grocery Bill

I’ve had a conversation about the grocery bill with several clients recently and thought it would be helpful to share some ideas to both save time and money while shopping for groceries. As most of you know, we have quite a few mouths to feed! Unless you eat out every single meal, then this article applies to you.

  1. Only Go Food Shopping Once a Week: Every time you go to the grocery store you make impulse purchases, which can significantly increase how much you spend. Also, is there ever a short line at the grocery store?
  2. Plan Your Meals for the Week or Month: If you know what you are going to eat ahead of time, then you can coordinate your food shopping with your meals. You can also see which meals make sense to cook on certain days to coordinate with your activities or work schedule.
  3. Make a List: This will make your trips more efficient, and will help to reduce the waste of throwing out food that you do not need. An advanced technique, if you are Excel savvy, is to make a list that you can reprint and then check off the items that you need. It will take a short time investment, but will save time and money after it is set up. Less waste = more money saved.
  4. Use the Freezer: When meat or other perishable items are on sale, then buy in bulk and freeze what you can’t use right away. To thaw, you can place the meat in the refrigerator a day or two before you need to use it and it will defrost slowly. This doesn’t always work well with fish, though. You can also use the freezer to cook double batches or meals, which will also save cooking time.
  5. Look at the Flyer and Stock Up: Once you get used to using the flyer, it only takes minutes to looks for deals, and then when you do find them make sure to stock up with as much as you can without the food going bad.
  6. Try the Store Brands: Many times the store brands are much less expensive than the name brands and the quality/taste are pretty good, but you have to try for yourself. A good example of this is cereal.

Other tips that are probably not worth the time and savings:

  1. Excessive Coupon Clipping: Spending more than a few minutes is enough time and will produce some savings. More than that and you should probably be on a reality show.
  2. Multiple Stores: If you are going to shop at multiple stores than you will use up a lot of time shopping and planning to save just a few bucks.