More than four years ago, we discussed phases through which companies go. We spoke of three phases: I. Sweat Equity, II. Organization, and III. Planned Growth. To get to Phase III, we have to make the right moves in I and II. Today, it is all about a new type of Phase I.
I. Sweat Equity (SE)—
In the New Millennium
The SE phase usually describes a company in its beginning days—long hours, difficult challenges, and creative decision-making in the context of limited cash. Energy is high, commitment is intense, and dreams fill your head as you build your company.
But there is a new SE company today’s print world—the one going through a turnaround. That SE company may be battling bankruptcy or emerging from it. In either case, survival is the focus and the stakes are high.
If this describes your company, here are some thoughts.
Stay Off the Margin.
Retrenchment is always a part of this type of SE company, but too many do it in a self-defeating way. They cut from the margins, starting with perks. For example, they shut down the free coffee machine, take some items out of expense reimbursement, or cancel their monthly Friday pizza day. Let’s take those three: Add up your savings. You may be able to do it without a calculator because you won’t save much. And you will pay for it with reduced morale.
Do Center Cuts.
A SE turnaround needs high morale and vast savings. Look at what is really costing you money and invest in what builds energy. Look carefully at your real P&L. Separate fixed and variable costs. Look at the big items and do one of two things: Either a) see if you can get rid of one of them, or more likely, b) reduce a few of them by a sizable amount.
When it comes to labor, family and friends don’t ride free. Neither hire nor retain out of sentiment. Make certain everyone is bringing value. When you let “insiders’ hang on, you bring down the morale of everyone. And be sure to get rid of anyone you can’t trust.
And if volume is low, combine the now fewer duties of two positions into one, and let go a weak performer, even if you have to pay a few extra bucks to the remaining employee.
Invest in Growth.
Too many companies make the mistake of cutting so much they fall below the line of viability. You need to cut fat and add muscle, and that means investing in sales and/or marketing. It doesn’t have to be expensive. You might want to talk to a creative expert in one of these fields, one who understands guerilla marketing.
Hoping for the phone to ring with new customers or the website to snag additional orders is “magical thinking.” You don’t have time for that. While you run lean, drench yourself in thoughts of how to increase volume.
You will benefit from an outside perspective.
If you use an accountant, make sure he or she is an analytical one. You don’t need some clown with an advance degree, simply entering data and adding up columns for you. You can do most of that yourself on a spreadsheet. I want a guy who will tell me that I am too high in indirect labor or that my direct labor expense ratio is too fat. And maybe a few ideas as to what to do about it.
A good industry consultant can give you a fresh and expert perspective on any area of concern, because he has seen it all. That does not have to cost much. I do a good bit of my work on the phone and online, saving time and expense for everyone, and the first conversation is free. Some will even take part of their pay out of increased revenues. And you are no longer alone as you face the challenges.
Get expert problem-solving inexpensively. Contact Dr. David about his special online and phone consulting. Dr. David has been solving printing problems for over 25 years. Reach him directly at 702-354-7000 or at email@example.com.