11/1/2009
MacLean at PacWest: Recovery Brings High Margins & Growth
“Great recessions are a great opportunity,” Randy MacLean declared at the Pacific-West Fastener Association autumn conference. “Recovery brings high margins and growth that will reward courage and boldness.”
The recession that began last year is a “once in a generation opportunity to force lean and optimal operations,” the consultant from WayPoint Analytics explained. “It is easier to take drastic action during an economic crisis. Never loose an opportunity to take advantage of a crisis.”
The recession will “clear out competitors and capacity and create an opportunity for ‘virtual acquisitions’,” MacLean added.
During the recession there may be no new sales to chase – meaning you will “have to wrestle competitors,” he acknowledged.
But you don’t even need to take customers from competitors to improve performance, MacLean said. Determine your Customer Profitability Ranking and make current customers more profitable.
The first principle of Quantum Profit Management is that “you are making more money than you know” and can increase profits by “correcting what is under your control.”
All companies have internal profits which can be significant and divert profit from the bottom line. “Correcting this is completely in your control,” MacLean explained.
Measure customers on net profit rather than a “gross profit mirage.”
The “Cost-to-Serve” is the core of performance. The sales force and every employee must be aware of CTS.
• Take a look at existing customers and find ways to make bad customers good.
“In every business, profitable segments generate profits consumed by losing segments,” MacLean said. Those cross subsidies “consume the bulk of every business’ profits.”
“Approach your worst customers ‘honcho to honcho’,” rather than sending sales people,” MacLean advised. Your CEO should tell the customer CEO that this account “is a loser for us” and discuss ways to cut costs to create a win-win situation.
MacLean said three of four accounts will make positive changes. “They don’t want to replace a big vendor.”
• Technology gets more powerful during a recession and the price for it drops. “Early adaptors get competitive advantage over others slow to catch on.”
MacLean advocated three steps: “Transform big losers, Move small/no profit customers to better serve and protect and serve big winners.”
“Make money on everything you do,” MacLean summarized.
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