Managing a Profitable Team: Four Hidden Areas Where You’re Bleeding Cash (Path to Profit Series, Part 5)

In our recent series on profitability, we’ve explored keys to more profitable client relationships (part one and part two) and more profitable supplier relationships, and in the next few installments, we are discovering how to ensure you are managing a profitable team.

Each seat taken “on the bus” in your business can and should be optimized for profit. But some of the biggest challenges in our productivity are the hidden ways we sabotage our profit with inefficient work or how we hinder strong, productive people with complicated workflows, draining the business of much-needed cash.

So, how can you ensure that each role has the best opportunity to maximize profit for your business?The first thing you should do is be aware of the four biggest areas that tend to drain profit in the average distributorship, areas that incapacitate your team’s ability to earn:  

#1 Duplicate Data Entry

Duplicate data entry is the biggest thief that steals your money every day.

A typical distributor uses eleven different systems to run their business, including programs like Word, Excel, Outlook, PowerPoint, product search engines (like ESP or Sage), Dropbox, Quickbooks, Adobe Illustrator, Photoshop and more. How much are you losing by entering data more than once?

Thousands.

And in many distributorships, the salesperson is still the primary order creation person, the salesperson is typically entering the order first (from the presentation through to the initial order entry), and then usually a production assistant will follow up on the tracking.

But what exactly does it cost?

Here’s a brief calculation based on a $1,000,000 distributorship:

• $1,000,000 in sales

• industry average order size: $1,200

• # of orders each year: 833

• X the average minimum time to create an order (includes prepping a presentation): 90 min = 1,249 hours for 833 orders

• X # of systems to re-enter an order (minimum of 4, presentation+order entry+tracking+accounting): 4 x 1,249 hours = 4,996 hours

• x the average hourly pay for an advertising salesperson ($49,680 per year/$23.89 per hour)

Creating your annual orders in one system would cost $29,838, but let’s say you are entering your data into four systems (and by data, I don’t mean just words, we’re talking numbers and products too, from presentations to estimates to invoices), then the cost would be $119,352.$89,514 a year in unnecessary costs!

Full disclosure: We sell a system that eliminates duplicate data entry, but that’s not why I included this point in the article.I ran a distributorship for years, and this was one of the most vexing internal problems we had, duplicate data entry slowed our progress, frustrated our team, and increased our errors. It is a massive problem in most distributor businesses.

But here’s the most expensive part that most of us ignore: opportunity costs.

What could your sales reps or inside team be doing with all that free time? Working on more specs for new sales? Visiting prospects? Coming up with new ideas for clients?When premium talent wastes time, you are draining profit and stagnating growth.

#2 Unnecessary Labor / Non-Mission Critical Tasks

There is a lot of unnecessary labor in our business, tasks that seem important but that don’t move the needle on sales.

Just one example: sample and showroom maintenance, the two-headed monster that swallows everyone.

It’s tempting to busy yourself or your team with tasks that seem important, but you must stop and ask yourself a critical question “What’s the most important thing I can be doing right now?” If your sales are down 20%, I guarantee you it’s not “organizing the showroom.” And if you’re not meeting your sales goals, I guarantee you that it’s not a good use of your team’s time as well!

Hint: Turn your showroom into a storytelling experience. Feature campaigns from your best customers. Forget trying to update product; you can’t keep up. Showcase your best work. There are hundreds of thousands of products in this business, and they change frequently, you can’t organize a hurricane!

Those are just two examples of many, the point is, the industry is complicated, with thousands of products, ergo, thousands of ways to occupy your time. Take a quick moment to write a checklist: What are your mission-critical tasks?

#3 Bloated Work

“Work expands to fill the time available,” my friend Larry used to say. In our business, bloated-work danger lurks around every corner. Do you really need to organize a spreadsheet for that apparel order and then enter it into your system?

Monster purchase orders and too many touches (following up orders) tend to expand as we have more time. We derive a lot of comfort from these multiple touches as we want to ensure that an order arrives safely but we can easily drift into habitual follow up as a form of work-avoidance. The hard work in the business -proactive selling tasks like prospecting for new business, asking for referrals, coming up with new ideas for new projects- that’s the work that gets easily shoved to the side.

One antidote: Do you know how many orders each person in your business processed last year and have you come up with an optimum average number for each rep? This is a bit tricky as not all orders are created equal, but it’s a good number to know as you analyze team profitability (we’ll cover more of the numbers in our next post). Simply knowing the maximum number per person can help ensure that you keep bloated work from robbing your profit.

One big lesson learned: Support teams, intentionally or unintentionally, “sandbag” in this business. What is “sandbagging”? Sandbagging is complaining about the deluge of work as a way to prevent the flood of more work. Now, sometimes, the complaints are legit, and your team might be truly overburdened with work, but often, the problem is not an incorrect ratio of a number of orders to person, it is usually either an inefficient system or the wrong people in the right seat (see the next point).

Or, how about bloated product presentations to clients? Loading a presentation to a client with one hundred products to choose from, with detailed pricing, versus qualifying the project with strategic questions or sending a round of carefully chosen preliminary ideas first.Bloated work is a productivity and profit killer in this business.

#4 Right Seats, Wrong People

The final area that drains profit is having the “wrong people” in the “right seat” on the bus. The phrase “on the bus” is from the (now) classic business book by Jim Collins, Good to Great: “Most people assume that great bus drivers (read: business leaders) immediately start the journey by announcing to the people on the bus where they're going—by setting a new direction or by articulating a fresh corporate vision. In fact, leaders of companies that go from good to great start not with 'where' but with 'who.' They start by getting the right people on the bus, the wrong people off the bus, and the right people in the right seats.”Nothing drains your profitability and damages your culture more than a square peg constantly trying to fit, daily, into a round hole. It’s frustrating, slow, and exhausting for everyone, not just for the poor square peg but for all the people who have to interact with that peg. The wrong people in the right seat slow the work, and the net result is that you have to hire more people than is necessary to compensate for the slow production, which adds to your payroll, which drains your profit.

Have you ever stopped to do a support team analysis? Reviewing, not only the individual performance but the efficiency of the team? Doing so might help you identify the strongest teams and the strongest individuals whom you can use as exemplars for getting the “right person in the right seat.”

Duplicate data entry, unnecessary labor, bloated work, and having the wrong people in the right seats, are four of the biggest hindrances to a more profitable distributorship. In our next post, we’ll talk about ways to analyze your numbers and your team for maximum profitability, but first, we had to clear the road of all those nasty productivity roadblocks that drain profit and prevent progress!

This post is the fifth installment in our series, The Path to Profit, the previous posts are: The Real Business of Winning, 4 Keys to Focusing on the Most Profitable Clients, Four Ways to Uncover More Profit with Existing Clients, and Your Suppliers Are Not Vendors - 3 Benefits of Stronger Supplier Partnerships.