10
Steps to a More Profitable Company
Is the subject of profitability on your mind lately? And, if so, are you taking concrete steps to address the problem or are you trapped in a cycle of motion without progress?
Often, it takes an informed outsider to provide an objective perspective and help establish a workable set of guidelines for success. But who has time to find that person, where’s the money to hire him–and, what should his skills be?
Marty Shindler, formerly with Coopers & Lybrand, is a management consultant who brings that Fortune 100 experience to bear on a number of creative and technical companies. Here are Shindler’s list of Top Ten Steps to take to enhance your business and improve your bottom line.
Basic business issues seem to plague many companies. It need not be so. In today’s environment, there is business for those who have the marketing skills to seek it and who are able to deliver work on time and on budget. The fact is, large or small, companies must balance creativity and technology on a sound economic base. Anything less is a recipe for disaster.
As a consultant to the media industry, it’s my job to identify trends and analyze what factors make a company successful, or, in some cases, not successful. In actuality, ten simple procedures, if followed, make the difference between success and failure, profit and loss. While some of these principles may seem obvious, there is a large gap between understanding and application that is not always readily apparent, especially in the heat of battle.
Ask yourself how many of these Ten Steps your company is following. You have nothing to lose and a lot to gain.
(1) Understand what it takes to get the job done
This is the number one problem at most facilities. Too often bids are pulled out of the air and given verbally to the client because no one took the time to fully understand and plan what it would take to get the job done, from cradle to grave.
There are always times when "panic" on the production team results in needing the bid yesterday. "This occurs repeatedly," one client remarked. "Then we wait for a go ahead. If we knew the ‘real’ bid deadline earlier," he lamented, "we would have put more thought into working up the bid." In the end, only the supplier suffers since we all want and are expected to produce the most creative work. Lack of time to think it out is never a valid excuse from the client’s point of view.
Be sure to ask for input from the people on your team responsible for key components of the work. Flat fee bids that go out lacking a full understanding mean you are left to fulfill the clients’ wishes on your dime. Also, be sure the client is clear about his or her needs and that you and your team understand exactly what those needs are and the deadlines. In many cases it is OK to ask for another day to do the bid. It will not be the first time.
Reduce the client request to writing early in the process and get a sign off from the client. If possible, get storyboards initialed by the client and attach them to the deal memo. A clear and documented understanding can also help in obtaining overages. This practice works.
(2) Organize the team early on and be sure all know their roles and the deadlines
Name a team leader. Perhaps this is the producer or coordinator. Be sure that person is involved in the bidding process whenever possible, as ultimately he or she is the one who will need to complete work accordingly. Assigning responsibility is the key or in the end, you’ll wind up only assigning blame.
(3) Schedule resources early
This applies to manpower and equipment. Do a formal schedule. Set benchmarks and, if appropriate, communicate them to the client. In larger organizations, this is an absolute must. Do not rely on "gut feel." This will only result in crisis management, extra costs and endangering the delivery date. It could mean the difference between a satisfied or dissatisfied client. And failure could eliminate hope of repeat business. Plan ahead!
(4) Supervise the work
Hold regular team meetings to identify potential problems early on. Do not assume that the problems will "work themselves out." That is rarely the case. Effective follow up and follow through is vital.
(5) Prepare a production budget
This should occur as part of the bidding phase, but many times companies use billing rates for the bid and cost rates for the budget–if one is even prepared. Both are important.
At one facility, the company had lost money on a prior project because several rented workstations were brought in to supplement the in-house equipment. Those rates were significantly higher than the in-house costs and billing rates. A quick telephone call to the vendor during the budget/bid process might have saved a headache and a large part of the profit.
Be sure to review billing rates periodically, before bids go out, to insure they are still in line with current manpower and equipment costs. Include adequate markup to provide for a contribution to overhead and profit.
(6) Prepare regular and up to date cost reports and an estimate to complete (ETC)
This is vital to determine if everything is on track and is probably the second most common and easily correctable mistake. Do not rely on your instincts. Compare the actual costs and the ETC with the original budget. Be sure that you understand the differences.
This is particularly important in tracking the number of hours the team works and in controlling the cost of outside services. In one instance a company was billed for and paid the scanning and recording costs from an outside service bureau where the studio had agreed to absorb the costs. Fortunately, it was detected by reviewing a weekly cost report mid-way into the project and could be corrected while the various decision-makers were still on the production.
Talk about easy ways to "save" money! One should never be surprised by the final cost. That kind of surprise could put you out of business.
(7) Communicate
Seems obvious doesn’t it? Unfortunately, team members do not always communicate project status to the producer and too often, the producer does not communicate effectively or frequently with management. Perhaps most importantly, remember to communicate with the client regularly.
On one agency project the lead creative attended the client review meeting without the in-house producer and was made aware of several important creative changes as well as a change in deadline for a portion of the work. Unfortunately, he did not tell anyone upon returning to the facility and the team did two weeks of needless work, only to redo it... with no added fee and under tight overtime conditions. Very embarrassing and costly!
No surprises should be the watchword. Communications can make the difference.
(8) Learn from your mistakes
This may seem like an obvious thing to do, but it is surprising how many fail to hold even a short post mortem to review both the mistakes that were made and the positive things that were learned. Do it near the end of the project or right after the delivery date while the information is still clear in everyone’s mind. Take notes. Use the information to bid and produce the next job better.
(9) Prepare a company budget
Your clients all prepare budgets, you should too. A budget puts into financial terms your goals and objectives. It must have meaning beyond a few numbers on a spreadsheet. You would not drive cross-country without a road map, why run your company without a map of where you are going? Be sure to include a cash flow budget. This will help in allocating moneys for those inevitable and costly capital expenditures.
(10) Prepare and review financial information regularly
Monthly financial statements should be prepared on a timely basis–5 to 8 business days following the month’s close. Comparison should be made to budget. Review the numbers. Remember, not looking at them is like buying a newspaper and not reading it. There is no benefit. Periodically (2 to 3 times per year) update the actuals with a forecast to see how the year end numbers will come out. This is the same procedure as an ETC, but on a slightly larger scale.
Competition has always been there for creative endeavors. Now compete on a business level as well. Examining your organization in light of these Ten Steps can make a difference in your bottom line. Your company will be more profitable and you’re building a healthier industry.
Next month, The Seven Steps Beyond
