Managing for Profitability
From The Articles – By Randy Eddy
Former CED Profit Center Manager – Published 2005
”Man who chases two rabbits has no meat for dinner” – Chinese Proverb
I started writing a few articles a couple of months ago to address a certain group of profit centers. This group of profit centers was challenged to make money even though they were trying as hard as they could. I started thinking about their situation and drew a couple of conclusions that led to those articles, which led to this book. My conclusions were as follows. First, there are things that can’t be taught. If you can’t figure out how to develop a customer relationship, then I can’t help you. So I concluded that there is no need to talk about that much. Second, there are things that are taught all the time. We have all heard 38% this and $10k GP/employee that and six turns, etc. etc. So there is no need to talk about that.
Some profit centers make a fair amount of money and some make a lot more than that. My belief is that almost any profit center can make substantially more.
Then there is the big group of things that, in my opinion, affect everything, yet don’t get as much discussion time. This book is about everything that is important, but isn’t often taught.
My hope is, that the reader (the target audience is a profit center manager), after comparing his/her profit center against the subjects in this book will find at least a few things that are mitigating profit, if not eliminating it. Some profit centers make a fair amount of money and some make a lot more than that. My belief is that almost any profit center can make substantially more. I also believe that making substantially more isn’t all that hard. If you are reading this and thinking, “Man, I am running the truck tires till they are bald, I am using borrowed #2 pencils to the nub, and I am working 60 hour weeks, yet I still can’t make a reasonable profit”, then this book is for you.
I am a firm believer that being a CED profit center manager is the best job in the world. Where else can you run your own business and get paid part of the profits for what you did, other than if you actually did own the business? And when you reap the benefits of those successes in the form of profit sharing, you can smile knowing that it was all your doing.
Where else can you run your own business and get paid part of the profits for what you did, other than if you actually did own the business?
Among other topics covered in this book are the importance of, and relationship between market focus, customer selection, capacity, and customer service. These subjects are covered in great detail because, though it is simple to understand the concepts, it’s not easy to do. Shortcomings in these areas look like this:
- The profit center is losing money with no clear way to get profitable.
- Though the P&L shows that there are more employees than there should be, everyone seems overworked.
- Because everyone is so busy, customer service is poor. Everyone talks about “our great customer service”, but it isn’t really there.
- It would take more business to turn a profit, but more resources to handle the business.
- Many management decisions are very difficult for you to make.
I hope you are able to sort through the myriad of concepts (I hesitate to just describe the solution), and find a few ways to make more money for your people, and have more fun doing it.