LOOK AT YOUR FINANCIAL STATEMENTS
How To Find and Fix Problems
When you look closely at your financial statements, you can usually find ways to fix your profitability problems. Below you will find ways to increase profitability, such as increased sales, reduced expenses, and improved productivity. For a good definition of a financial statement seehttp://businessdictionary.com
CASE STUDY: Upon reviewing one client’s profit and loss statements, we noticed the unusually high gas, maintenance & repair expenses. These outrageously high costs were tied to a fleet of 3 cargo vans used by installation personnel. While starting their business, they were trying to keep their start-up costs low by purchasing older, basic, unmarked vans. Unfortunately, they were 3/4 ton with many miles on them and had gas-guzzling V-8 engines. As a result, they were inefficient, costing the company far more than newer, more efficient vans that could do the job better and for less cost!
Their Financial Statements Spotted the Problems:
First, a large service area of 3 cities with approximately a radius of 60 miles, all allocated to the same marketing dollars and pricing structure, was discovered.
Next, three vans averaged 128 miles per day. As a result, there is no profit in time in transit to and from jobs. No money with too much driving! Three vans clocking over 100,000 miles a year ate into profits!
Third, gas costs were killing them with an average of 8 MPG. Add repairs of over $3600 a year, not to mention downtime! And these OLD vans were killing them! Their products were light, so they did not need the 3/4 ton vans. These were just white, generic vans that did not set them out from the crowd!
First, replace those vans with NEW vans that were ½ ton V-6 engines and averaged 17 MPG. To achieve this, we coached the client on the best approach to get loans from their bank. We also shared how to get the best loan rates from the bank or go to a credit union for help to acquire new vans.
Next, we reallocated marketing efforts by first getting marketing and vehicle decals to correctly identify the vans as they were driving all those miles on the roads. After that, the vans became a driving billboard! We wanted everyone to see it. What an inexpensive yet effective way to advertise daily! Every neighbor will know who was trusted to do work next door!
Then, those reallocated marketing dollars had to be readdressed based on the area demographics. The service area was large and diverse, yet they had the marketing dollars spent equally in every area.
Finally, with the savings on maintenance and repairs, they could allocate additional funds into outfitting the installation and retail staff with uniforms and professional shirts to identify their company!