Whether you’re a large organization or a smaller outfit, every company strives for the same thing: increased profitability.
There are many levers you can pull to get there: sell more profitable stuff, find new customers, raise prices, trim operation expenses, and so on.
While cutting expenses isn’t sexy or easy, it will increase profits, regardless of your ability to grow top-line revenue. Here are six operational tips to help you get there.
1. Understand your true cost of labor: For project- based work, it’s all about accurate estimations. Do the job faster? More money in your pocket. Do the job slower, well … You can only improve what you measure, so consider having techs fill out detailed time sheets — using categorized codes to show what they spent time doing (travel, prewire, cutout, etc.). It can be a pain, and is definitely time-consuming, but ultimately it allows you to better estimate jobs.
2. Wash, rinse, repeat: Once you understand the cost of labor, you’ll know where to make improvements. Here’s where process is king. Any time you can standardize it adds efficiency, saving time/ money and increasing your bottom line. Back in the day when we had our custom AV business, we did time and motion studies on tasks like hanging a flat-panel TV.
Related: Reducing the Total Cost of Digital Network Operations
Every technician had his own way of doing it, and everyone did it differently. By collaborating to find the best and most efficient way, we were able to roll out a company-wide process that cut the average install time in half. Things like pre-job/work van stock checks and job-site checklists can also create more efficiency, so all technicians are fully pre- pared the minute they arrive on site.
3. Package, package, package: Not everything has to be done from scratch every time. Parts and pieces you know you’ll need for most jobs should be standardized whenever possible. Take racks, for example: although the size may vary from job to job, they follow the same installation methodology and layouts, so you don’t have to recreate the wheel for every job.
This allows for standardization of parts, and reduces your inventory count. Taking the time on the front-end to build those things systematically into your quoting program is worth it — it decreases the amount of time spent behind a computer, and increases time spent in front of your customers.
4. Just say “no” to going to the store: Who hasn’t made a last-minute trip to the big- box store or hardware shop to grab missing parts and pieces needed for that day’s job? While it might seem like a quick 30-minute run doesn’t add up to much, over the course of weeks, months and the year, those are hours of otherwise billable time.
Anything you use more than 3x per month should be kept in stock. Arrange for weekly or monthly bulk delivery of all the little things you know you’ll need on every job — like screws, wire ties and boo- ties — that your technicians seem to run out of constantly.
Related: What Does Your Cash Management Strategy Look Like?
5. Order for the job: On the flip side, keeping a lot of inventory sitting around collecting dust is costly and inefficient. Using suppliers that can deliver job-specific products and equipment “just in time” (and right to the job site if you need it) can make you leaner and cut warehousing expenses because you’re not overbuying or taking up space with gear you won’t soon need.
6. Reduce overhead: This one may require more cre- ativity, but it’s doable. For starters, get in the habit of doing yearly audits on phone, Internet and other service providers to make sure you’re getting the best rates possible. Think about consolidating vendors to get better purchasing power. Always take advantage of free tools — like Google Docs and Skype — that can replace basic services you might be paying for today. Even partnering with a local gas station can result in reduced costs when you negotiate for better rates on fuel for your fleet.
If you don’t already, take the time every six months to set some annual and bi-annual goals for your business. Make one of those reducing your operational costs and increasing efficiencies, because even the small things can make a big difference to your bottom line.
