Ten Keys to
High Profits
This is the second of a two part series.
By Kevin Kehoe
In this second of a two part series
we outline the final five of these practices. If
you missed the first part, email kkehoe@earthlink.net
for a copy.
6. KEEP YOUR BEST CUSTOMERS
The key to revenue growth is retention of current
customers. Maximize retention, by minimizing dissatisfaction
levels. Providing a low enough price is always important
in getting new business, yet it is never the key
to retention. Retain customers by at least meeting
minimum job quality and responsiveness levels. Measure
this using a simple survey device. The truth is
almost any customer will be dissatisfied with some
part of your service, and open to running off with
a lower price offer. But why give them the opening?
Yes , you may see them again when they become dissatisfied
enough to make a change again – which usually
happens within 18 months. But why lose 18 months
of billing, when you can prevent it?
7. BE FIRM ON STANDARDS AND POLICY
The Marines succeed for a simple reason –
discipline. Every person in the organization complies
with a simple set of standards, or they find themselves
out of the organization. The most profitable companies
in the industry are tough on standards, and fair
with people. The simplest standards are policies
for attendance, uniforms, safety, equipment use,
and reporting time. The consequence for failure
are always the same – (1) corrective verbal
coaching, (2) written warning to file, (3) suspension,
(4) termination if no change is made by the employee.
It is a simple and effective formula. Be sure to
foster discipline with your team in order to build
profits.
8. MANAGE BY SYSTEMS
Build one new management system every year. Start
with your billing system. Then work back through
your project management, purchasing, contracting,
and selling systems. Each system requires three
elements (1) a responsible person, (2) an information
input form (e.g.; time card, purchase order), and
a management report (e.g.; job cost summary, payroll
summary). The only way to achieve profitability
and true teamwork is through the efficiencies and
accountabilities created by a SYSTEM. Take the time
to document job descriptions, organization charts,
paperwork, and management reports – one system
at a time.
9. KEEP SCORE
You get what you inspect. Keep score and share the
results to increase focus and profits. There are
four score keeping areas. (1) Investment –
Monitor equipment turnover rates and return on assets
semi-annually. (2) Financial – Monitor sales
volume and gross profit monthly. (3) Operations
– Monitor labor utilization and realizations
rates weekly. (4) Production – Monitor quality
and safety daily. The key is to use this information
to educate people about the connection between these
metrics and profit. A good place to start is a team
meeting to play the money game. Start out by giving
a foreman 100 one-dollar bills, then walk through
the P&L having him/her "dish out "
the money. This gets people's attention and shows
them where they make a difference.
10. PAY FOR PERFORMANCE
Only AFTER you implement the first nine items in
this series, should you establish a pay for performance
type system. The system should be simple, and based
on a number like hard gross profit dollars for managers,
and realize rate dollars per hour and quality for
foremen. These are measurements wholly within their
control. The manager program can pay quarterly or
semiannually. The foremen program must pay monthly.
Base the earned bonus on a simple percentage of
a person's annual base wage starting from a low
of 5% to a high of 15% depending on results. Of
course every bonus system must be based on a minimum
NET PROFIT budget. Paying for performance helps
keep the game interesting. This is the key to motivation
(not the money)!
FREE RESEARCH REPORT:
Get involved now and get a copy!!!
EMAIL US at info@kehoeguido.com
to get a copy of a four-page industry survey on
financial performance and staffing. By submitting
a completed survey, you reserve a copy of the report
for yourself.
NEXT TIME IN THIS NEWSLETTER:
The Ten Immutable Laws for creating a profit driven
Strategic Plan.
News
and tips for contractors to help you make more
money.