Your sales can be up, your plant can be busy, and your company can still be underperforming. Even when every department is doing its job, the company can still be in a deficit relative to achieving its overall goals. There are three key areas involved and they are all trying to excel at what they do best. Sales is trying to grow revenue, operations are trying to keep equipment busy and be efficient, and finance is keeping score and working hard to protect margins. Individually, all of these makes sense. But unless they’re aligned, it’ll be difficult to reach company optimization. So, can two things be true at the same time?
Why is it that a company can be busy, growing, hitting it sales goal, and still under performing financially? It may not be the performance of these key critical areas, as opposed to the gap that exists between them.
In my experience, I see company owners focus on a wide range of numbers when they view success. From top line revenue, value added, gross margin, contribution margin, or the bottom-line profitability of a job. Some owners focus on the individual jobs that go through the shop, while others are focused on the overall mix of the work in any given month. I can make the argument that you can have a shop full of profitable work, but if you don’t have enough of it, you won’t reach your company goals. There’s another view that the work mix is a portfolio, and if you have enough to exceed your value-added breakeven number, you will be profitable for the period.
In the perfect scenario, your operation will be filled with all profitable work and that you have enough of it to exceed your value breakeven.
Create a common economic language for deciding what work you want, what that work is worth, and when and if you’re willing to make exceptions.
Every print business is slightly different, and based on your volume, the mix of work, and the strength of your new business development pipeline, you must make decisions based on the facts and realities that you face.
Let’s start with a four-step operating model to help ensure you’re getting the work and the opportunities you want, and need.
- It begins with your ideal client profile, ICP, which identifies the customers and the work the company is structurally built and equipped to serve profitably.
- Add in a layer of pricing guard rails, which defines normal situations, as well as discount authorities, floors, exceptions, and overall guidelines.
- The third component is a deal desk. This is where exceptions, the large or complex or strategic opportunities are brought so that sales, operations, and finance can all weigh in. These are the opportunities that shouldn’t be decided by one department alone.
- And let’s close out the model by creating a feedback loop. This tells everybody what happened after these projects ran, including estimated versus actual, spoilage, contribution, and any production issues. This information should be compiled on all your work, and by using strategic filters, the outlier projects are individually reviewed.
We talk about pricing a lot, because that’s a symptom that most business owners will recognize. Achieving alignment around profitable revenue, is the bigger opportunity for most business owners.
Mike Philie helps owners and CEOs in the Graphic communications industry validate what’s working, identify what needs to change, and create a practical path forward.
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