Profit Improvement Detectorist – Part 4

Rapid Profit Improvement (Series Post no. 4)

In our recent dealings with Business Owners and Managers it has become clear that many have been facing challenges when trying to identify the particular areas where additional business profit may be lurking, and that, as previously pointed out, is precisely where a new perspective is needed, because a fresh pair of eyes – like ours – can often rapidly uncover previously hard-to-see profit levers.

Case Study No. 4 – Identifying Savings is in the Detail

The Owners of several businesses asked if we could take a look at their underperforming Business Unit. The Manager of the Business Unit in question thought that he could solve the underperformance issue by simply cutting 10 staff from the operational headcount.  The Owners were worried about the suggested action as they rightly thought that cutting the operational headcount could result in reduced capacity which would then adversely affect potential profit.

So, we ran our Rapid Profit Radar Process; and the results were very revealing. We discovered from our investigation into both the monthly accounts and payroll, that, while the payroll – as expected – provided a full analysis of the salaries and wages broken out by staffing type, the full payroll was lumped entirely into the Salaries and Wages account in the monthly accounts.

Within a single day we had ascertained that the struggling Business Unit had 20 Operational staff and 10 Management and Administration staff on the payroll – not exactly a ratio built for maximising profit! Additionally, not only were the Operational Staff paid overtime at double-time – which was instigated as a staff retention measure – but all the overtime was being charged out to paying jobs so added no burden to the business.

When further analysis revealed that the Operational Staff had an overall productivity rate of 90%, it became clear to us that it would be more cost effective to employ 10 additional Operational Staff rather than cutting that number from the payroll. Our findings and recommendations were discussed with the owners, and the net result was the addition of 6 new Operational Staff, and the reduction of 2 Management & Administration staff, resulting in annual savings of approximately $800k.

For more information on Rapid Profit Opportunities simply email us at profit@intotheblue.co.nz or contact John by LinkedIn message.

We always run a Zero-Risk policy with our customers… No Profit Improvement – No Fees.