Maximizing profits
How to maximize profits and grow your margins.
“NOTHING”!
That might have been the best business advice I have ever received!
The year was 1980 and I had just joined my father’s company and it was day 1 on the job, so naturally I was anxious to get started (a little background – I had been working for Touche Ross, now Deloitte, in Toronto. I had received my CA designation in 1977 in Halifax. My father had asked if I wanted to join the family business, and my answer was, “of course”) – so back to Day 1.
“Nothing,” was the part of the answer to my question, “What do you want me to do”?
The rest of his answer was this, “go out to all our businesses (steel, contracting, printing & publishing) and find out what we do, who we work with, who our customers are, who our suppliers are, what our communities are like, and generally what we are all about.” He said do that for three months and most importantly, do not make any decisions!!!
So, the key take away for me was to really know your business before you can make a difference. Everything else I have learned in business started from Day 1.
“There is no one smarter than everyone else in the room”
We all need tools to help us in all parts of our life, for business and personal. The best and for one, the primary tool I need (read again, need) in business is a budget. Not a namby-pamby attempt, but a real down to earth detailed budget that sets out your goals and how you are going to achieve them. Preparation of the budget will take a lot of time and thought and will be your guiding document. Budget preparation and accuracy improves with each year until it becomes an indispensable tool without which you would not know how you could succeed. At some point, every statement you make about your business will include reference to “the budget.” That’s when you are on the correct road.
Now then, a budget is only truly useful when it is compared to how your business is actually doing. You have all heard the saying, “you cannot manage if you do not measure”. Very true words.
It is necessary (no, vital) to prepare monthly financial statements which also show the budget (monthly, year-to-date, both current and prior year) amounts. Accompanying the numbers must be a written report on all variances. This means that you have really looked at those items that are not going well. It is important to have the correct people in the room when reviewing results. Lively dialogue is required to make the most of this process. Everything needs to be plunked on the table. The late brilliant Nova Scotia businessman, Purdy Crawford said, “There is no one smarter than everyone else in the room”. Words to remember, as everyone should contribute. Regarding these monthly meetings, it is very important that they are timely. i.e. within two weeks on month-end. This allows action to be taken when needed. In other words, you are only a short time into trouble and can right the ship before it hits the rocks.
“I always make sure we have a very good Board of Directors or Advisors”
The best budget / plan in the world will not work (or work as well as it should) if the right people are not on board. Early in my career with the family business, we found that our publishing & print business (weekly newspaper, flyers, etc.) was in disarray. Losses were mounting and employees were leaving. My father’s response was to reach out to the publishing world and get someone on board who had the industry specific experience. We found such a person (the late Victor Wilson) and his impact was immediate and very positive. We went from losses to significant profits in one year with no additions to capital equipment or personnel (actually, with less people).
When I introduced Vic to our management team, one of our senior people told Vic (in response to a comment he made regarding a process we had been using), “That’s not how we do it here,” and Vic’s response was, “That’s why Mr. Cameron hired me”. Kind of put everyone on notice on this Day 1. Vic’s main enduring contribution to this business and then all our businesses, was the introduction of the budget process, which he learned and used for many years while working with the Thomson Newspaper Group, at the time, one of the best run in the world.
Another action needed for optimum results is to be out in your workplace – be visible. My father said that no matter how busy we were, we should go out to our factory, or other workplace areas at least once a day. This keeps you in connected and a lot can be learned by this. After all, that’s where the action is!
While there are lots of other factors which help operations maximize profits, I always make sure we have a very good Board of Directors or Advisors. They should include outsiders who will question bad performance and ask for the solution. This is so important as we can all lose sight of the goal. Your Board should be encouraged to give you the tough questions/comments. For example, some years ago during negotiations to sell one of our businesses, I was not being very co-operative. My Chairman (an outsider) asked me if I wanted to sell and I said “why, of course,” so he told me “then act like it”!! What great advice right when I needed it the most.
To sum up, the following will help lead to maximizing profits (although Vince Lombardi said that, “Perfection is not attainable, although you will reach Excellence on the road to Perfection”):
Know your business (do nothing at first)
Make a plan (budget)
Regularly review your actual to budget
Have the correct team in place
Be visible in your workplace
Have a great Board of Advisors