Routinely examine each operation for its contribution to revenue. Challenge the operation's contribution to positive (income exceeding expenses) revenue.
Some operations are contributors to overhead and administration costs. There's a process in management accounting for determining a department's contribution. It's a calculation for measuring the consequences of discontinuing the negative revenue flow from a department or branch.
Some branches, departments or product lines with a negative flow are maintained for strategic marketing purposes. The best known example of this is a loss leader which generates sales for the profitable products/services.
On the other hand, you may discover functions that have outlived their usefulness. Such management changes as revising, cancelling or combining may be indicated as viable solutions.
Discipline yourself to follow the routine examinations. Be creative in defining and selecting the various profit and expense centers. Perform rigorous and due diligence. Make courageous and inventive decisions.
The president of a large advertising agency was concerned about the negative revenue of past Decembers. His examination revealed that no significant sales contracts were obtained. Yet, the account executives (salespeople) were spending huge amounts entertaining existing clients. In other words, it was party time and advertising decisions were on hold.
In early November the president issued the following directive to all staff.
Holiday greetings. Effective December 5th this office will be closed and will reopen on January 4th. During this period, the following items in your possession shall be deposited with the front desk attendant: keys to the front door, all company credit cards, devices upon which usage charges are paid by the agency and any other device causing an expense for the agency. Expenses related to entertaining or gifting clients shall not be approved for reimbursement.
Each account executive shall accommodate all services to our clients accordingly.
All remuneration shall be paid as usual. This holiday break shall not be considered as any part of your regular annual vacation.
Happy holidays
There was not a single protest or complaint from the staff. Customers seemed more relieved than disappointed when notified of the office closure. No clients were lost and following year's sales revenue realized a slight increase. Of course, profits and staff morale were improved.
© 2004-2006 UncleMaxSays.com
UncleMaxSays.com is a division of Kamloops International College Inc.
Privacy Policy Terms of ServiceSmall Business - Time Management - Business Plans - Business Plan Coaching
