Skills and Optimization Methods

Allow yourself time to gain the knowledge you will need to use reports to achieve whatever your purposes may be  ~Dale S. Richards

Taking control of your own business – what’s it worth to you? Allow yourself some time to learn.  

A little fun with learning optimization

Concrete Truck Monitoring System

I have used this example in a number of settings – but it gets the message across. Consider that everyone has a GPS system today, but 15 years ago, GPS did not exist for the common applications. For the example application, we will learn from today, it was for a concrete company. Tell me what a concrete truck driver does after the load in delivered?

1. First and foremost, the truck needs to be washed out or it will be twice as heavy in a years time.
2. After the truck is washed what happens next? Typically the driver would go to the coffee shop for a break.

A locator device costs $6,000 per truck but it could track trucks and result in one more load per day delivered. So if you owned a company with 100 trucks, how much would it take to outfit all of the trucks? ($600.000)

Most concrete companies did not have $600,000 cash to purchase the locator device. The company in this example was selling about $20,000 per month or $240,000 per year.

I was able to help the company devise a Break-Even Calculator so the owner could determine the ROI and Break-Even for the project. A local bank came on board to provide financing.

The business owner would supply the revenue from an eight-yard load, the cost of the load, the cost of labor, and the number of trucks in the fleet. How long do you think the average project Break-Even was for the project? (Between 25 and 90 days!)

In the normal capital budget process, a project with a Break-Even less than two years is considered for the budget. In my example, there was such a short break-even, that almost all customers wanted the locator device.

With the calculator and bank association, the company improved sales tremendously. In two years, the company sold for $20 million!

80/20 Customer “Gold Program”®

What is the Pareto Principle?

The 80/20 Rule. This rule was developed back in the 1880s by an Italian/French man and it applies today. What are some examples of the 80/20 principle?

80% of your revenue comes from 20% of your customers

80% of your revenue comes from 20% of your product line

80% of your output comes from 20% of your employees

80% of your problems come from 20% of your customers

80% of your employee problems come from 20% of the employees

How can you use the 80/20 principle to PROACTIVELY increase your revenue by 10% – 200%?

First, you must find out who the top 20% of the customers are. Take your customer sales data for the last two or three years and download this data to a spreadsheet. Once it is downloaded sort from highest revenue to lowest. (You should also look at the customer by margin.) Add a column for cumulative percent on the side of the revenue sort. Sum each row until you reach 80% of the total revenue. Now you know the top customers.

Once the top 20% or 80/20 Customer “Gold Program”® customers are determined then a methodical program can be designed to build relationships with key people within the organization. What people’s titles would you want to build a relationship with? Chief Executive Officers (CXOs), purchasing agent, accounts payable, project director, sales department, etc. Now strategically have a corresponding department person in your company build a relationship with them. How do you find out what these people like or enjoy? Meet or talk with them to get to know them better. This process will build a proactive vs. reactive customer relationship.

The benefits of this 80/20 Customer “Gold Program”®  are significant

Jay loved Dale Richards’ Presentation skills and optimization methods, including coaching skills, 80/20 Customer “Gold Program”®, and systemization. Jay Bernath, Atlanta, Georgia and the Vistage Members learned key business concepts from Dale Richards’ presentation on Business Valuation Principles – How to Increase Your Business Value, Financially, Operational and Strategically. learn.