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Abe WalkingBear Sanchez

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Way of Thinking Drives Profitability

Copyright 2004 by Abe WalkingBear Sanchez

Business Managers not focused on improvement become administrators at best and bureaucrats at worst. We tend to think of Sales as being the only competitive area of business, but that's only the beginning; competition continues beyond Sales through the entire business process.

Improvement Equals Profit Enhancement There are 4 basic ways to improve the bottom line:

  1. Cook the books.
    Long before the guys at Enron there was another Texan who bamboozled for profit. Billie Sol Estes made the cover of Time Magazine in the early 1960s as the "Texas Wiz Kid". An inquisitive child, Billie Sol grew to be an inquisitive man; he figured out that liquid fertilizer was lighter than water and was worth a whole lot more. Huge storage tanks filled with water, except for the top 2 or 3 inches of liquid fertilizer, provided the security for loan after loan. He also once borrowed money on his neighbor's cattle.
    Billie Sol built a financial empire on one shady deal after another. He had all the politicians in his pocket, including LBJ. There's a down side to "cooking the books", you may end up with a room mate named Burno who insists you wear a little apron. . . Don't do it!
  2. Raise Prices.
    An increase in prices should increase profitability; unless you end up being noncompetitive and lose customers. Raising prices works best when you're a sole source provider or when you have more business than you can handle. Remember the 90s?
    Better still is raising prices when the quality of your product / service and business processes is higher / better than anyone elses. It's the customers' total cost of doing business, not price that keeps them buying. "Buying cheap to save money can be like stopping a clock to save time." To compete, you must have quality both in your product / service and in your business processes.
  3. Sell More.
    If you sell more and control the costs of those sales you'll make more money. The most profitable sales are most often the repeat sales to the same customers. Customer retention and repeat sales are tied to more than price.
  4. Decrease Costs.
    Any reduction in cost of doing business without loss of income will have a dramatic impact on profitability. Improved productivity rules.

Ronald Coase and Friction in Business

An English economist, Coase wrote that there is friction or costs involved with business entities. There's the friction/cost of "searching" for customers and suppliers. There's the "coordination friction/cost" of on-going business processes. The last and most expensive friction/cost, is that of "failure", of something going wrong and having to be redone.

The CEO of a chain of white table linen restaurants estimated that for every meal sent back, 32 new meals had to be sold to make up the loss.

Smart customers understand about the "total cost" of doing business. Your competitor's prices may be lower, the quality of their product/service may be equal to yours; but if their business processes are screwy and drive up the customer's cost. . . you have no competitors. You don't have to be twice as good as the next guy, be just a little better and you stand head and shoulders above competitors.

Fewer Doing More

Unemployment is up, and so is productivity. Those companies that constantly work on improving the quality of their product/services and of their business processes will be the survivors. The future holds more of the same.

Document Knowledge / Expectations

All human endeavor is predicated on knowledge, on what you know. Business knowledge is more than facts or data; it's the "orderly collection of information needed to get things done."

The verbal communication of policies (goal driven guidelines) and procedures (steps needed to achieve goals) expands on training time and creates errors. Word of mouth business operations are like a sailor's promises while on shore leave, they're not worth the paper they're not written on.

Every manager's job description should start with a commitment to improvement; "Focus on improvement, on how things can be done better for the same costs or less." If people aren't told in black and white what's expected of them, they get busy and forget.

Track the source of screw ups and reward customers / employees / vendors who tell you of a failing, of an opportunity for improvement.

Write down the goal(s) of each business function and then ask the experts, the employees, how the goal(s) can best be reached. Write down the steps necessary and ask new employees for new knowledge; how they'd do things differently.

In Closing

Don't worry about industry averages when gauging the KPIs for different business areas; it's much more important to focus on improvement, on how things can be done better. It takes a lot less effort to keep an old customer satisfied than to get a new customer interested.

And remember, "The bitterness of poor quality lingers long after the sweetness of cheap price is forgotten."

Transforming Your Sales Force for the 21st Century
Transforming Your Sales Force for the 21st Century
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Only $69

Distribution companies, by their nature, should be sales-oriented companies. But, most distributors don't do sales very well. That's the premise behind this new book.

The book, written for sales managers and executives in the distribution industry, provides a blue print for executives to transform their sales forces into highly directable, effective, focused performers.

The book begins with an analysis of current conditions that pressure the distributor to revise the way he/she thinks about his sales force. Kahle then paints a picture of the distributor sales force of the future. The sales force will be:
  1. more specialized
  2. more directable
  3. more flexible
  4. more professional
  5. more productive.
His advice begins with "See it as a system," a concept that is based on one of the key principles for the book, "When you change the structure, you change the behavior of the people who work within that structure."
~~~ About The Author ~~~

Abe WalkingBear Sanchez is an International Speaker / Trainer / Consultant on the subject of cash flow / sales enhancement and business knowledge organization and use. Founder and President of www.armg-usa.com , WalkingBear has authored hundreds of business articles. A hard hitting and fast paced speaker, Abe brings life and energy to a critical business function whose true potential has yet to be realized by most businesses. TEC (The Executive Committee), "Inc." Magazine Annual Business Conference, CU (Denver), CSU (Ft. Collins), Texas A&M, NACM, IDA, AWCI, ARWI, PEI, BCFM, RAB, STAFDA, WIMA, ISD, Pet Industry Distributors Assn., Rain Bird, American Lock, Southern Wholesalers Assn., IBM, Touchstone/2000 Software are but a few of the groups, schools, companies and associations for whom Abe has conducted programs.

He can be reached through: A/R Management Group, Inc. P.O. Box 457 Canon City, CO 81215 Phone: 719-276-0595 Email: Abe@armg-usa.com Website: www.armg-usa.com

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