Manufacturing Case Study
From Operational Mayhem at a Loss to Streamlined Profit that Financed an Acquisition
Within two years of learning the profitable strategies and tactics in ProfitU, a $40M privately-held kitchen cabinetry manufacturer generated strong enough financials to finance an acquisition and became a profitable, $100M company.
But before they started ProfitU there was nowhere to go but up. They were losing money although their CFO had done a lot of conventional cost cutting. Unfortunately, dealer and customer relationships had suffered as a result and the anticipated bottom line improvements had failed to materialize.
The CEO had hired Lean Consultants at a cost of over $300K, and yet manufacturing timelines had almost doubled and quality was extremely poor. As a result, 18 of the 100 employees per shift became non-revenue-generating, dedicated full-time to rework efforts. A revolving door of Production Managers failed to make any headway. Between scrap, labor and materials, this was a $4M per year problem for this $40M business.
A new Sales Director had added over 100 new dealerships in the previous year in an attempt to grow the top line, but most of them had never made a sale despite receiving costly sample packs, training and in some cases full kitchen installations worth $20-50K for their showroom.
Conventional approaches to driving profitability were having exactly the opposite effect until their team engaged with the content in ProfitU.
They selected an internal cross-functional team of ten employees at various levels from the CEO to the shop floor, committed to spending 90 minutes once per week focused on replacing the everyday behaviors that were destroying profit with those that created value for customers, and in a short period of time, they achieved...
Three Major Profitability Breakthrough
On the very first day, a 21-year-old Accounts Clerk was involved in an exercise to evaluate customer profitability, not on the basis of conventional accounting, but based on the customer and internal behaviors that were eroding profits. She realized that all of the aging receivables were a significant cost to the company, and although she’d been dutifully making collections calls she had an AHA! moment that there was a better way.
She started making her calls in the spirit of partnership, finding a win for the dealer at the same time as there was a win for the company. Within 30 days, A/R was completely current… and stayed current. With hidden-and-take-for-granted financing costs eliminated, profits improved.
We took our Customer Profitability Ratio from 2:1 to 5:1 within 1 year – a huge boost to profitability. When you helped us involve our entire team in the process, they got it instantly and made the commitment to take this to 100:1 with our biggest 100 customers.
President, Large Privately Held Custom Kitchen Cabinet Manufacturer
Distribution Case Study
From Founder-Financed to Highly Profitable in Less Than Six Months
The Founder of a $20M regional distributor of janitorial, food products and hospitality supplies was locked into a common problem for many business owners: the company was not profitable thus he was financing the company from his personal assets to keep it afloat.
But he had a big dream: to transition the company to his son and daughter-in-law and finally retire to live the good life. Unfortunately, he knew his son could not assume the obligation to finance the shortfall.
He tried expanding his business model by acquiring a recurring-revenue coffee equipment and supplies company in the hopes of positive cash flow. Instead, he found that every coffee machine sold meant a large upfront cost to his business, and a long payback period. The situation was getting worse.
The cross-functional team of 12 junior and senior members of the company enthusiastically bought into the 30-Day Profit In Plain Sight Bootcamp and within 30 days ProfitU had completely paid for itself for the first year. The big breakthrough for this firm came when they learned how to use one of the key ProfitPLAYBOOK scoreboards which not only shows which customers are behaviorally profitable vs those that aren’t, but also reveals where there are unexploited sales opportunities at strong margins.
Three Major Profitability Breakthroughs
Creating the profitability ranking for their largest customers was a huge eyeopener, and when the team realized it was within their power to start guiding customers to shift simple everyday behaviors by encouraging them to place higher-value orders using the online ordering system, they created a win-win, costs went down, and sales went up.
The Sales team already received training on how to help customers transition to the online ordering application when it was launched – but until they saw how big a difference it meant to their new profit-sharing plan, they simply didn’t understand why they should bother changing the status quo.
When they finally connected the dots and realized that immediate order and delivery confirmations also made their customers happier and more loyal than conventional emails and voicemails piled up waiting for end-of day manual processing and next-day confirmation, their win-win AHA! Moment was complete.
When the company tackled the sea of opportunities that the long-entrenched sales representatives had been ignoring, sales and margins went up again.
As a newly-hired Sales Manager, I thought I would have to create the systems and sales rep accountabilities myself. I have never seen anything like the ProfitPLAYBOOK for focusing sales reps on hidden business opportunities. You made my life unbelievably easy.
Sales Manager, Family-owned Distributor of Hospitality Supplies and Equipment
Within the first 30 days of working through ProfitU we added enough profit to our bottom line to fund the entire program. Within 3 months our margins were up 5% and individual sales were up 7-13% year-over-year, enabling us to hit breakeven. Within the first 6 months, ProfitU transformed our business from a loss of $20K/month to profits of $18K/month.
I’ve collected an unbelievable amount of information from the Value Creation Conversations. I’m amazed by how many opportunities there are to grow our business with our clients and easy fixes that can help improve our relationships with them! In 30 years of business I’ve never had so much fun collecting this type of information, what a tool!
CEO, Family-owned Distributor of Hospitality Supplies and Equipment
From Self-Inflicted Profit Wounds to Behavioral Shifts that Transformed the Bottom Line
Services Case Study
What this firm learned in a single afternoon illustrates that the profitability problem is often the result of well-intentioned behaviors which become self-inflicted wounds. This was completely hidden and an accepted way of doing business until their AHA! moment. Best of all, the conversation about the level of service uncovered a large new sales opportunity the company hadn’t been aware of.
The President of an acclaimed “Best Companies to Work For” HR Staffing firm was hungry for profit to fund development of an innovative HR Management software application to add to their suite of billable client services. However, despite belonging to not one but two CEO-mentoring groups, nothing she was trying was delivering bottom line results.
Three Major Profitability Breakthroughs
When they kicked off ProfitU, the 11-person cross-functional team immediately discovered that their biggest A-list client was actually costing the company more than they were worth. The VP of Sales blustered that it was impossible, but one by one the team members made their case using the simple Post-It-notes-on-the-wall data they’d discovered in their Kickoff workshop, until it was clear that their assessment was correct.
This is a common problem experienced by many businesses – because of the size of the account, they had been over-serving the client, providing five qualified candidates for every position rather than the three they were contractually bound to present.
Top-down directives to “do whatever it takes” to take care of a large client are not uncommon, yet are rarely backed up by evidence that the approach makes economic sense or drives customer loyalty or retention.
In less than an afternoon, the Customer Profitability Diamond not only showed us that we were losing money on our biggest customer, but more importantly, how to fix the self-inflicted wound that was causing it! When we worked with the client to do so, we were immediately rewarded with an additional $300K in new business that we didn’t even know was there. That quickly more than paid for this work.
CEO, Executive Search & HR Technology Development