Business managers not focused on improvement become administrators at best and bureaucrats at worst.

by Abe WalkingBear Sanchez

We tend to think of sales as being the only competitive area of business, but that’s only the beginning; competition continues beyond sales through the entire business process.

There are four basic ways to improve the bottom line.

Cook the books
Long before Kenneth Lay and Enron there was another Texan who used his powers for evil. Billie Sol Estes made the cover of Time Magazine in the early 1960s as the Texas Wiz Kid. An inquisitive child, Billie Sol grew to be an inquisitive man; he figured out that liquid fertilizer was lighter than water and was worth a whole lot more. Huge storage tanks filled with water, except for the top two or three inches of liquid fertilizer, provided the security for loan after loan.

Billie Sol built a financial empire on one shady deal after another.  He had all the politicians in his pocket, including Lyndon B. Johnson. There’s a down side to cooking the books. You may end up with a roommate named Bruno who insists you wear a little apron: Don’t do it!

Raise prices
An increase in prices should increase profitability; unless you end up being noncompetitive and lose customers. Raising prices works best when you’re a sole-source provider or when you have more business than you can handle. Remember the 90s?

Better still is raising prices when the quality of the product/service and business processes is higher/better than anyone else. The customers’ total cost of doing business, not price, keeps them buying. “Buying cheap to save money can be like stopping a clock to save time.”

Sell more
If you sell more and control the costs of those sales you’ll make more money. The most profitable sales are most often the repeat sales to the same customers. Customer retention and repeat sales are tied to more than price.

Decrease Costs
Any reduction in cost of doing business without loss of income will have a dramatic impact on profitability. Improved productivity rules.

Ronald Coase and friction in business
The English economist Coase wrote that there is friction or costs involved with business entities. There’s the friction/cost of searching for customers and suppliers. There’s the coordination friction/cost for ongoing business processes. The last and most expensive friction/cost is that of failure, of something going wrong and having to be redone.

Smart customers understand about the total cost of doing business. Your competitor’s prices may be lower, the quality of their product/service may be equal to yours; but if their business processes are screwy and drive up the customer’s cost, you have no competitors.

Fewer doing more
As I write this article, it’s January 2003 and unemployment is up, and so is productivity. Those companies that constantly work on improving the quality of their product/services and of their business processes will be in a great position to take off when the economy turns, and it will turn.

All human endeavor is predicated on knowledge, on what you know. Business knowledge is more than facts or data; it’s the orderly collection of information needed to get things done.

The verbal communication of policies (goal-driven guidelines) and procedures (steps needed to achieve goals) will expand on training time and create errors. Word-of-mouth business operations are like a sailor’s promises while on shore leave, they’re not worth the paper their not written on.

Every manager’s job description should start with a commitment to improvement: Focus on improvement, on how things can be done better for the same costs or less. If people aren’t told in black and white what’s expected of them, they get busy and forget.

Track the source of screw ups and reward customers/employees/vendors who tell you of a failing, of an opportunity for improvement.

Ask new employees for new knowledge, how they would do things differently. Write down the goal(s) of each business function and then ask the experts, the employees, how the goal(s) can best be reached. Write down the steps necessary and ask new employees for new knowledge; how they’d do things differently.

Don’t worry about industry averages when gauging the performance of different business areas; it’s much more important to focus on improvement, on how things can be done better. It takes a lot less effort to keep an old customer satisfied than to get a new customer interested.

Abe WalkingBear Sanchez is an international speaker/trainer on the subject of cash flow/sales enhancement and business knowledge organization and use. Founder and president of www.armg-usa.com, Abe also sits on the board of www.BestBizways.com Inc.

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