Learn to Do More with Less - On the Numbers
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SECTION: On the Numbers

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Learn to Do More with Less

By Garry Bartecki

Article Date: 02-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.

Big changes are coming, but it's your big chance to become a more efficient operation.

Every time we go through a recession, AED members seem to cope and fight their way through what has been a limited turnaround time, when you consider the last three or four cycles. This time, however, it is different. This could be the big one that changes the way we do business. But, as we all know, every recession winds up as an opportunity for certain entrepreneurs who have weathered the storm. And in this regard, these circumstances will not be different.

While the big one will change the way we do business, I also believe this big one offers up numerous opportunities just waiting there for the taking – some you’ll have to work at, and some are free of any up-front costs.

What key areas can make a difference? Here’s my Top 5, in order of importance.

There is no doubt you will be running your business with fewer people. Running it effectively with fewer people is the issue. Can you do it with the current staff? Well, if you have any doubts, now is the time to upgrade your staff for probably less money than you are paying currently. There should be plenty of experienced people looking for work willing to take less base pay and more incentive pay than any time in the recent past.

Better and More Use of IT
Helping personnel operate more effectively is a function of using your systems and procedures to the utmost to offset the “excess hours” you eliminated. This will be a must if you hope to maximize profits and reduce costs. Having standard policies and procedures in place will allow you to outsource functions, use permanent part-time staff and, in effect, operate with fewer people while producing necessary output.

A seminar presented at the American Institute of Certified Public Accountants Dealer Conference demonstrated the benefits of staffing only when you need the people and not hiring full-time staff to fill part-time positions. Analyze precisely what every department needs, and staff accordingly.
Another approach is to have each department head truly manage his department without having middle management involved in the process. With proper access to departmental data, managers should be able to manage their departments with limited input from the business owner. If department heads understand their departments and how they get paid – and are able to interact with other department heads – the need for the GM gets eliminated.

Technology can also be used to “lean” out the sales process. E-mail, blackberries, video conferencing, telemarketing, laptops, GPS, etc., are all available to reduce travel time, auto expense and the time it takes to close a sale.

Communication systems and equipment can also help speed up the process, but these need to be reviewed on a regular basis to keep costs down. I see a lot of opportunity in this area – free money available here!

Vendors Willing to Listen
Cut the number of vendors. Consolidate purchases and get three quotes. Ask for discounts. Vendors are willing to listen to get or keep your business. Ask department heads to examine every purchase order to determine if you need to incur the expense and whether you can get it cheaper. In many cases a cost reduction is available.

One study estimates that purchases in this area represent 1 to 1.5 percent of total revenues and that a 25 percent cost reduction is readily available. So, for example, a $50 million dealership incurs $500,000 to $750,000 of expenses where $75,000 to $112,000 savings are available, respectively.

Interest Rates
For many of you, a reduction to current interest rates would add a lot to your bottom line. You have attractive fixed rates and more attractive floating rates available if you can refinance your current debt. If your balance sheet is attractive to the banks you can probably achieve some benefits from refinancing. In short, you have to try because the potential benefits are so great.

Lean Concepts
Everything we discussed up to this point makes you a lean organization. You do more work with fewer people and for less cost. You sell more with lower sales costs. You finance your inventory and rental fleets at lower interest rates.

In the end, you accomplish these results with little or no up-front costs – you do it just by using your systems and being aggressive when it comes to saving money.

See, even the big one can provide you with an opportunity to learn how to streamline your business to operate with fewer people and less cost. Take advantage of this opportunity.
AED is ready to help you achieve these goals. Call me for more ideas.

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