Gross Profit Improvement 101 – Costing Models

Is your Gross Margin either lower than it should be or lower than you would like it to be?  If the answer to either of these questions is Yes, then Into the Blue NZ Limited have the answers to help you increase it.  What’s more if you engage us to identify your Gross Profit Initiatives, our services will come at Zero-Risk to you – No Gross Profit Improvements, No Fees.

It is our experience from using our Rapid Profit Radar Diagnostic, that between 50% and 75% of businesses have issues with their Costing Models or Bill of Materials Process (BOMs).  The main issues being:

1. The business does not have a costing model or BOM.
2. The costing model or BOM is out of date.
3. The costing model or BOM is incomplete.
4. The Business does not have anyone with the skillset to use the Costing Model or BOM.
5. The Business has not had – and still does not have – the time to update or create Costing Models or BOMs.

Into The Blue NZ Limited are experts in Costing Models. We have added – and continue to add – significant additional Gross Profit to businesses of all sizes and in every type of industry, every year.  As mentioned above this is a very common issue in the Business World which is why we have developed the skillsets to write user friendly Costing Models for almost any business.

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

For more information please either reply to this post or email profit@intotheblue.co.nz

Rapid Profit Improvement (Series Post no. 9 – Product Mix)

Continuing this series of posts, many Business Owners and Managers are facing challenges when trying to identify specific areas where additional business profit may be waiting to be unlocked.  This is an area in which a fresh set of professional eyes – like ours – can often rapidly uncover previously hard-to-see profit opportunities as we will be looking at your Business from a fresh perspective.

Case Study No. 9 – Product Mix. 

The owners of a $5M turnover food processing plant were concerned about their low margins.  A review of their costing models and supply chain, using our Rapid Profit Radar Diagnostic, highlighted that they were obtaining their supplies of raw materials from one major, and six smaller, suppliers. 

The costing models only included the prices of raw materials from the major supplier which delivered its raw materials freight free.  The smaller suppliers, which provided 33% of the raw materials, matched the major supplier’s raw material price but included a freight charge.  This freight charge, which contributed 14% of the total material cost, was not included in the costing model.

This needed to be rectified, so we had our client add the freight charges into the cost of materials, and the resultant increase in their sale price resulted in a 10% – or $500k p.a. – increase in their gross margin. 

In addition, our Rapid Profit Radar Diagnostic, highlighted significant issues in their manufacturing processes which we were able to correct to prevent a reoccurrence of the costing model issues.

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

Rapid Profit Improvement (Series Post no. 8)

Continuing this series of posts, many Business Owners and Managers are facing challenges when trying to identify specific areas where additional business profit may be waiting to be unlocked.  This is an area in which a fresh set of professional eyes – like ours – can often rapidly uncover previously hard-to-see profit opportunities as we will be looking at your Business from a fresh perspective.

Case Study No. 8 – A start-up food processor with productivity issues. 

A quick review of the plant layout showed that our client was not using standard assembly line production methods.  In fact, it looked as if the plant had been left where it was delivered.  We had the plant layout changed to allow for Flow – a straight line production run.

The net result was an increase in productivity and capacity which resulted in a profit improvement of approximately $1.2M p.a.

In addition, as there were no documented manufacturing processes, by employing our Rapid Profit Radar Diagnostic, we were able to document the manufacturing processes to not only prevent a reoccurrence of the flow issues but also to minimise any potential rework.

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

Is Rapid Profit Improvement a Priority?

Do you think that your business is underperforming but either don’t know where to look or have no time to make the potential improvements?

If your answer to any of that is yes, it may be time to allow a good Business Advisory Company to help you out.

You may be reluctant to engage a Business Advisor because you fear it could be throwing good money after bad; but we here at Into the Blue NZ Limited feel it is our responsibility to support businesses in these difficult times.  That is why we are offering a No-Risk Business Profit Radar Diagnostic to rapidly detect profit improvement opportunities. ‘No risk’ means that if we do not identify enough profit opportunity to more than cover the cost of running our diagnostic process, there will be no charge for the Profit Radar Diagnostic and Report!

If this resonates with you and you are open to exploring how it may be of benefit to your business, simply reply to this message or email profit@intotheblue.co.nz

Rapid Profit Improvement (Series Post no. 7)

Continuing with our series of Weekly Rapid Improvement posts.

Case Study No. 7 – $2.5M Manufacturer with low Gross Margins

The Business Owner asked us what we thought were the main causes of his low Gross Margin.  Included in our first two answers was “rework”.  The Business Owner agreed and confided that, although he hadn’t identified where it was actually happening, he estimated his rework to be around 20%.

There were no written processes, so we documented his manufacturing processes, using information gained from our Rapid Profit Radar Diagnostic to both reduce and report on his business’s rework.

The new processes reduced his rework to approximately 3% and not only increased his Gross Margin from 28% to 36% (approximately $200k) but also increased his capacity to do more work from the improved productivity.

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

For more information on creating or improving a business model please call John on (021) 625-871, and further more information please visit Into the Blue. 

Rapid Profit Improvement (Series Post no. 6)

As previously mentioned in this series of posts, many Business Owners and Managers are facing challenges when trying to identify specific areas where additional business profit may be waiting to be unlocked.  This is an area in which a fresh set of professional eyes – like ours – can often rapidly uncover previously hard-to-see profit opportunities as we will be looking at your Business from a fresh perspective.

Case Study No. 6 – The Supply Chain contains the single Biggest Opportunity for Profit Savings

A large retailer was struggling to find ways to increase its profit.  It didn’t want to put through a price increase as this would have made it uncompetitive in what was a very competitive market.

Based on that premise, we ran our Rapid Profit Radar Process over the business’s overheads.

The first item we flagged as questionable was what looked to be the rather excessive printing costs, which were running at around $200k p.a.  One of the Directors, however, advised there was no need to investigate this area as the existing printer was his uncle who provided the service at a discounted rate.

Having regularly heard similar stories from other clients, we nevertheless went ahead and obtained 3 quotes from different printing suppliers.  All 3 quotes came back at a $60k p.a. saving.  On agreeing to a year’s contract, 1 of the 3 potential suppliers agreed to a $75k p.a. saving.  That same supplier was also notified that the retailer would be going back to the market each year to ensure that they continued to receive the required levels of service at the best price.

A $75k p.a. profit saving was achieved from the first supplier that we reviewed.  The net saving from a review of all suppliers – both overheads and purchases – was approximately $1.0m p.a.

For more information on Rapid Profit Opportunities simply email us at profit@intotheblue.co.nz.

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

Rapid Profit Improvement (Series Post no. 5)

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. 5 – Identifying Savings is in the Detail and Analysis

The Docklands Light Railway (London) asked if we could take a look at their wage structure as they thought it was a bit on the high side.

So, we ran our Rapid Profit Radar Process, which included an audit of the payroll.

For those who don’t know London or its history, at the time our expertise was sought, there were three distinct rail networks operating throughout the English capital; namely, London Transport, British Rail, and the Docklands Light Railway, which was separated from London Transport to help develop both the London Docklands and East London areas.

Our Audit revealed several areas of opportunity, one being that there were 5 people on the payroll who no longer even worked at the Railway!  Three of those former employees had transferred to London Transport when the Docklands Light Railway was separated from London transport 12-months previously. London Transport refunded the wages.

Of the remaining two employees, one had been retired for 18 months and the second had left to pursue another opportunity 6 months previously.  Both had notified the Docklands Light Railway in writing on multiple occasions – but to no effect.

As a result of our audit, the net savings to the Docklands Light Railway was – in terms of New Zealand dollars – the equivalent of approximately $550k p.a. plus a refund of $350k from London Transport.

For more information on Rapid Profit Opportunities simply email us at profit@intotheblue.co.nz.

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

Is Rapid Profit Improvement a Priority?

I am a Profit Improvement Detectorist – I find that elusive profit in places most Business Owners don’t know where to look by using my Profit Radar System.

So, if you are worried about how your Business is performing, then maybe you should consider engaging somebody like me to identify potential improvements.

I am offering a No-Risk Business Review to rapidly detect Profit Improvement Initiatives that can help to unlock a business’s profit potential.  This means that if I cannot identify enough Profit Improvement to at least cover my fees then there will be no charge for the Business Review.

My point of difference to other Business Advisors, is that I can rapidly identify and add fast-tracked profits to almost any business which is why I am confident in offering a No-Risk Business Review.

If that sounds like something you might be interested in, then why not either give me a call on (021) 625-871 or send me an email to john@intotheblue.co.nz – after all, you’ve nothing to lose.

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.

Is Rapid Profit Improvement a Current Focus?

Uncertainty in the current global market environment, is requiring businesses more than ever to focus on profit and resilience levers across their organisations.

Whilst unleashing profit opportunity is a constant challenge for many organisations, we are seeing a current trend in which businesses focus more on sustaining their bottom-line outcomes than looking for growth opportunities.

To support businesses in this challenging environment, we have developed a rapid, self-funding business diagnostic tool called the Profit Radar System – a process that we can run over your business to find rapid-profit improvement opportunities.  It is self-funding in that, if we can’t find savings that at least cover the cost of the process, we won’t charge you.  This way there is no risk to you – it is win-win and the only outcome for you is a positive one!

Finding the hidden levers that unleash further profit opportunity are always hard to uncover. That is why so many businesses are leaving profit opportunity behind…it’s just too difficult to detect amongst the day-to-day transactional white noise of running a business and servicing your customers.

And that is why we have honed our Profit Radar System into a rapid process that will work in any business.  The diagnostic process generally runs for a week, after which you will receive a full report of rapid profit opportunities in your business.  In one of our most recent cases, it took us just 3 days to unlock $6.6M of opportunity!

If this resonates with you, simply drop us an email on profit@intotheblue.co.nz for a complimentary exploration of profit opportunities for your business.  If you would like to see more examples of how to uncover this rapid profit opportunity, please click on this link https://intotheblue.co.nz/blog/ otherwise contact us directly at profit@intotheblue.co.nz to setup a complimentary Exploration Meeting.