This month, I would like to start by asking you some questions. Do the hours you spend on administrative tasks reduce your company’s potential revenue? Have you ever tried to figure out how to increase revenue without increasing your investment? Have you ever tried to cut costs without sacrificing your revenue goals? If you answered “yes” to any of these questions, read on!
We’d like to introduce you to one of our clients, a small graphics design company. They have a strong and loyal customer base, world-class customer service, and their graphics design work is very highly regarded. However, they could not consistently improve their profitability. We implemented an Efficiency Analysis Review to determine where the company could be losing out on potential revenue and therefore, profit growth.
Finding Your Efficiency
Due to the small staff, the Owner felt the need to “double-up” on his responsibilities, taking on not only the design (revenue producing) component of his job, but also all other tasks required to run a business. His other employee spends about 80% of his time on project work, and so generates a large portion of the revenue. Because the Owner split his time between design and "running his business", his revenue contribution was much less than that of his employee, despite the fact that he charges a higher rate than that of his employee.
We asked our client to keep track of the number of hours he spends on administrative tasks during the course of a single month. The analysis showed that he spent around 65 hours per month on non-revenue generating tasks. Let’s say his hourly billable rate is $125.00. That’s $8,125.00 in monthly revenue he missed out on! Given our client’s business structure, it would be difficult for them NOT to turn a significant profit with that additional revenue coming in every month.
We recommended that our client hire an experienced Administrator to take on 80% of his administrative tasks, which he did. Even adding the Administrator’s salary to company expenses, his profits grew approximately 8% monthly following this hire. He also began billing more revenue, and actually enjoying his job more!
The point of this case study is to illustrate the benefits of doing what you do best, and hiring other experienced personnel to handle the tasks that will help you grow your business productively and efficiently.
CPN & Associates LLC is a Business Consulting Firm offering strategic business reviews, analytical financial reviews, operational management, and many other small business services.