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You Canít Cut Your Way to Prosperity:
8 Powerful Financials that are Not in Your P&L Reports
Too many organizations are obsessed with their profit and loss reports. It hasnít occurred to them that they might be looking at the wrong numbers. Letís look at some numbers that just might have a bigger impact on the profit and loss, then some of the numbers that are on the reports.
1. Increase the customer sales - what could happen if you were more passionate about increasing the volume of your customer sales as opposed to your number of sales. The president of a company in Utah sponsored educational sessions for his customers to bring them tools and knowledge that would help them grow their own business. His theory was that if he focuses on helping them grow their own business, then his company would grow their business as a result.
2. Reduce the total cost to the customer - A forklift distributor in Los Angeles, who sells and services forklifts to Lowe's, Home Depot, and Costco among others, has adopted this strategy. A customer's forklift operator had run his/her lift into a post, damaging the lift cage. The cage part of the lift was severely bent. The normal action by the technician responding to the call would have been to order a new cage. The cost of this part is substantial, not to mention the labor required to remove the damaged component and install a new one.
The technician assigned to this customer, without consulting with his manager, went to an auto parts store and purchased a hydraulic jack for $200.00 with his own money. The technician figured he could use the power jack to straighten the bent frame of the cage and return it to its original condition. His action was effective, and having saved his customer a large sum of money, will certainly have a huge impact to increase customer loyalty in the future. When these technicians show this kind of initiative, it is a fairly safe assumption that customers will spread the P.W.O.M. (Positive Word of Mouth), which can also contribute to an increase in sales for the company.
3. The cost of not training is greater than the cost of training. The huge investment has already been made. The cost of human capital, which includes salary, benefits, payroll tax and social security etc., is usually the single biggest expense an organization has. Then they forget the missing piece, which is training. Itís the small investment in training that leverages the big investment that has already been made. A formula to plan your investment in training is:
Dollars invested in training (12 months) divided by the gross salary = _________% In other words training as a percent of payroll. The average in the United States has been 1/2-2% which is fairly anemic. That number should be skyrocketing. Organizations that want to excel should target in the 5-10% range.
4. The cost of not weeding the garden - If you do not weed the garden of your poor performers, you will jeopardize losing your top performers and the performance of the team will go down. When you finally weed the garden, the employees will not only applaud your actions but also wonder what took you so long.
5.The cost of turnover - is far greater that most managers realize. Here is a formula to calculate the cost of turnover.
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