Your business is failing and you just can’t put your finger on it. Your revenues are good, but your margins are declining. Every time you look to make a cut to save on expenses or cost of goods sold either you or someone in your operation decides you just can’t do that “because”.
Take “because” and throw it out the window.
What if you didn’t do those things that are costing you in salaries, overtime and out of pocket expenses?
What if you decided that you will no longer be a slave to the process?
Sounds impossible – well it’s not.
One of my clients is a “Used Car Dealer”. Their first problem was they didn’t know their numbers. They were basically using what I would like to call the “Shoe Box” method of accounting. Money in, money out! So first thing was to get a grip on how the cash was coming in and how the cash was going out. They were hemorrhaging cash and were borrowing to cover for the monthly shortfalls without any idea why?
We got them onto Quickbooks and ran financial statements for the prior year and found that they were spending almost $500,000 a year on repairs and body work on the cars they were buying from the auctions.
So we challenged them – “Why are you spending all this money on repairs and body work?” Answer – “We have to “because” we need to do the body work and repairs in order to get it ready for sale”
Turns out this was delaying the advertising of the vehicles for more than 30 days and all that time they were paying interest on the debt.
Throw the “because” out the window.
We convinced them to shut down the repair area the next day. The new paradigm was buy clean cars with lower mileage and no body damage.
We also decided that the cars had to have a clean Carfax – no accidents. The time to market was reduced from 30 days to 7. By buying cleaner cars in better condition the turnover of the inventory accelerated and so did the cash flow.
Next time someone tells you the reason something is done a certain way is “because” quickly look at the process and change it.