Should You Get A Return On Effort?

I was talking to the owner of a rapidly growing company who was concerned because despite working hard on growing the company, profits were falling short of their hopes. The question of the moment was, “Shouldn’t we get a return on our effort?” The short answer is yes, but the longer answer is, it depends on how you define “return.”

A recent Wall Street Journal article (“Amazon’s River of Profit” May 1, 2017, p B9), noted that Amazon just achieved eight quarters in a row of profitability. Amazon was founded in 1994! It started as an online bookstore, and is now one of the largest Internet retailers in the world, based on total sales and market capitalization. It looks more like a high-tech company than a retailer.

I remember back in the 1990s when investment analysts were questioning the fact that Amazon wasn’t turning a profit. They seemed very concerned that this start-up was potentially years away from profitability and they naturally questioned if it was a “good investment.” Well, if we had all invested in Amazon stock at that time, we would all be millionaires.

Jeff Bezos clearly defined “return” a bit differently than the analysts. His initial goal was growth and market share. Then he moved toward innovation, using his company’s distribution strength to add additional products. Recently, they added cloud-based services, Amazon Web Services. In the last two years, the stock has more than doubled and is well on its way to $1,000 per share.

Amazon is very innovative and continues to focus on growth, but is now also earning money. Their “return” is market capitalization driven by innovation, growth and profitability. As they’ve matured, their overall strategy has shifted. Bezos was a genius of strategy and kept his focus, not buckling to the analyst’s comments.

What is your strategy? Does it define your return? Is your return on effort what you hoped it would be?

© 2017 – Rick Pay – All Rights Reserved

 

The Sooner You Start…

…the sooner you get results. Many companies have great plans, ideas or desire to improve, but they put it off. Often when they make plans, they over analyze and set time frames way out into the future (e.g., five years).

When they are considering making changes in the organization or using outside resources such as consultants, they often say something like, we need to wait for our sales to increase, or our cash flow to improve, or for better staff availability and so on. What happens is that any benefit they might achieve from the changes is delayed. What they don’t realize is that the competition is not waiting.

Why Wait?

Time and money are both a matter of priority. Companies have all the time there is, and the money or budget is simply a matter of prioritizing the results. If a project or other expenditure has a high return on investment, why wait?

I mentor consultants, and often hear consultants say that while they want to grow their practice, they think they’ll wait three months, or until they get the next project, or some other reason for delaying. What I find is that my fees are often paid back multiple times within the first couple of weeks of the mentoring relationship. Why postpone the opportunity for success and increased profit, especially when competitors are frequently moving forward with great enthusiasm? I suspect this has to do with low self-confidence, especially when they see that moving ahead has a high ROI.

The Time is Now

Many executives, managers and consultants fall into the trap of procrastination. If you have the opportunity for success, no matter the type or circumstances, don’t wait! Make it a priority. The time to take advantage of high ROI is now. The sooner you start, the sooner you get results.

© 2016 – Rick Pay – All Rights Reserved

The Sooner You Start…

…the sooner you get results. Many companies have great plans, ideas or desire to improve, but they put it off. Often when they make plans, they over analyze and set timeframes way out into the future (e.g., five years).

When they are considering making changes in the organization or using outside resources such as consultants, they often say something like, we need to wait for our sales to increase, or our cash flow to improve, or for better staff availability and so on. What happens is that any benefit they might achieve from the changes is delayed. What they don’t realize is that the competition is not waiting.

Why Wait?

Time and money are both a matter of priority. Companies have all the time there is, and the money or budget is simply a matter of prioritizing the results. If a project or other expenditure has a high return on investment, why wait?

I mentor consultants, and often hear consultants say that while they want to grow their practice, they think they’ll wait three months, or until they get the next project, or some other reason for delaying. What I find is that my fees are often paid back multiple times within the first couple of weeks of the mentoring relationship. Why postpone the opportunity for success and increased profit, especially when competitors are frequently moving forward with great enthusiasm? I suspect this has to do with low self-confidence, especially when they see that moving ahead has a high ROI.

The Time is Now

Many executives, managers and consultants fall into the trap of procrastination. If you have the opportunity for success, no matter the type or circumstances, don’t wait! Make it a priority. The time to take advantage of high ROI is now. The sooner you start, the sooner you get results.

© 2013 – Rick Pay – All Rights Reserved

For more information on my mentoring program, click here.

Where to Apply Lean

Many companies begin their Lean journey by targeting labor productivity improvement and cost reduction. One of my clients found that labor was 9% of sales while materials was 45%. If this client reduces labor costs by 10%, they add only one point to their bottom line. A 10% reduction in materials, however, adds 4.5 points to the bottom line. With further analysis, they found that if they reduced overhead by the same amount, they’d see the same 4.5% benefit. In this case, my client will get more bang for their buck by applying Lean to materials and overhead.

As you develop a plan for your own Lean initiative (or other process improvement effort), it’s smart to remember that your business model includes labor, materials and overhead, and the greatest opportunity to increase the bottom line isn’t necessarily always by reducing labor costs. As you target your Lean initiatives, look for initial targets that have the highest return on investment.

© 2011 – Rick Pay – All Rights Reserved