Find Ways to Improve Manufacturing Company Profits

In trying to understand business issues, case studies can serve as a useful tool to show us what we may not see at first glance in our own businesses. When I was doing the research that led to the founding of the Turnaround Management Association a number of years ago, I had the “opportunity” to compile, read, and review over 900 case studies on attempted turnarounds. As I read about companies from a variety of industries, geographies, and backgrounds, I was able to decipher certain trends and best practices. While I obviously don’t have the space (or your attention span) to delve into that level of detail in a blog post, I wanted to recount a case study and point out some lessons to be learned.

better resultsA $100+ million company lost 25% of its revenue during the period 2005 – 2010. Simultaneously, EBIT declined by 91%, dropping to 0.9% of  2010 sales numbers. A turnaround firm was retained to restore revenues and achieve at least 10% EBIT by the end of 2012. The results of the project were that 2011 revenue improved by 20.20% over 2010 and 2011 EBIT was 5.5% of 2011 revenue, an increase of 470% over that of 2010.

How the Results Were Achieved

Strategic Alignment

By analyzing the markets served, rates of growth, and trends, the turnaround firm was able to highlight the very best opportunities for high growth. Historical analysis yielded insights into top customers and products, with breakout information by plant location. As insights were gleaned from the data, brainstorming sessions were held with the executive team to modify strategic and tactical plans.

Product Pricing

As with many companies who suffered a decline in fortunes, this company had begun to compete on price rather than more strategic competitive advantages. As their products and services became commoditized, considerable price variability had snuck into the company based on local market conditions. With considerable (40%+) market share in its primary markets, the company in crisis had very few price comparables available from competitive intelligence by which new pricing could be developed. The consultants helped the company do the following:

  1. Make product groups by cost and technical specs,
  2. (For each product group) establish minimum, mean, and max prices,
  3. Determine products that were priced outside of guideline rages, and
  4. Identify customers who were not profitable to serve.

Margins were terrible, so the company implemented the following procedures recommended by the turnaround firm: 

  • Pricing for non-strategic customers was immediately increased,
  • Held meetings with strategic customers to explain the fair price increases, and
  • Future price increases were planned in unison with strategic customers.

Product Costing & Standardization

The old product costing model was jettisoned in favor of a more accurate, easier to maintain one. Product Standardization was accomplished by analyzing SKUs across key product groupings. A small list of products were designated as standard offerings. Everything else was labeled “custom,” with appropriate cost and pricing decisions.

Operations Improvement

Process improvements were instituted after plant visits. Highlighted items included:

  • Supply chain improvements through TQM and JIT were achieved
  • Minimum order quantity guidelines streamlined production runs and enhanced scheduling efficiency
  • Setup and preventive maintenance routines were sharpened
  • Paperwork and scrap reduction and recycling were instituted

The culmination of 2011 efforts was that higher contribution margin at the plant level. Production scheduling and materials requirement procedures were highlighted as areas for additional improvement. 

When an outside team is brought in to focus on profitability and the executive team cooperates fully, great things can happen in a turnaround. Clear communications, improved decision-making, unified focus all lead to enhanced morale and the profitability becomes an outgrowth of good management.


Are You Doing it “To” or “For” a Prospect?

Many who aspire to increase the top line (revenues) of a business know that sales can seemingly cure a multitude of other problems. With enough money to spread around for paying bills and employees, plus some for marketing, customer service or maintenance, your company can improve morale and your ability to retain top talent as well as existing customers. However, in an effort to develop new business, our sales teams often do a very poor job. Conversion rates are low, so more leads are needed than would otherwise be necessary. In turn, more time is required, more overhead expenses thereby generated, and profits eroded. If we were able to improve the way we secure new clients, our organizations would be vastly more successful!

The biggest challenge a sales (interchangeable with “business development” or “client development” in settings wherein the word is anathema) professional faces is the distrust of the person on the other side of the table. Buyers are often afraid that something is being done to them, and dig in their heels or tune out their minds. Against this type of resistance, it can be extremely difficult to secure new accounts. The conversation must, therefore, disarm the buyer (in a genuine, sincere way) so that the perception changes to one of feeling like the salesperson is doing (well) for the buyer or her organization.

With the  combination of easily accessible information via the Internet and increased competition via globalization, it is incumbent on sales teams to keep their products and services from becoming commodities whereby the only means of competition is price. This objective can best be accomplished through consultative conversations. One of the leading minds on the topic of consultative selling is Mahan Khalsa, author of Let’s Get Real or Let’s Not Play (aka Helping Clients Succeed.) Helping (prospective) clients succeed should be the goal of every sales effort, but rarely is. In fact, hard line sales methods don’t seem to to take the client success into consideration as all, so long as the selling organization’s goals are met. 

Khalsa writes often about two key concepts: “getting real,” and developing an “exact solution.” To be real is to be authentic, truthful, expressing clear intent, and speaking from values. It is a paradigm wherein the seller doesn’t accept the first response without asking clarifying questions–the purpose is to break down false pretenses, move past fears, and to get to core issues as comfortably as possible for all parties concerned. While no solution is perfect unto itself, the goal of creating an exact one is to have a strong urge to leave few stones unturned in order to reduce ambiguity and partner on both identifying problems and the methods of resolving them.

With the right mindset, a salesperson can overcome the following (* taken from Let’s Get Real, chapter entitled “We Both Want the Same Thing”)  inhibitors of client success:

Our issues:

  • we don’t listen
  • we make assumptions
  • we have preconceived solutions
  • we need to make the sale
  • it takes too much time
  • we don’t understand their business
  • we know what they need better than they do, and
  • we don’t talk to the right people.

Client issues:

  • they don’t know what they need
  • the can’t articulate what they need
  • they don’t agree on what they need
  • they won’t give us good information
  • they don’t let us talk to the right people
  • they are unrealistic about time, money, and people needed
  • politics count more than business sense
  • they procrastinate, and
  • they can’t make decisions.

Taking time up front to either determine (jointly with client) that a solution does not exist or create a solid business case is critical for better sales success. When we match client expectations to those of our organization with regards to the people, time, and money needed to achieve success with regards to a given opportunity, we demonstrate shared interests and feasibility. Knowing how decisions are made, by whom, and the timetable removes guesswork and allows us to offer a solution that exactly meets the client’s needs.

Traffic Schmaffic – Get Conversions

In the course of advising startups (and some existing clients) on how to gain traction with their business proposition, I ultimately have a conversation about target buyers. Notice the word “buyer” –it is a different word altogether than “shopper” and “viewer.” When we obsess on trying to get web traffic, foot traffic, and the like–but not on conversion–we have lost sight of what is ultimately most important.

If given the choice between 100 website visitors of whom 20 become buyers or 1000 of whom only 15 become buyers, most would actually choose the 1000. Their reasoning would likely be that 1000 impressions is better than 100 and that they hope that the other 985 could be targeted for future conversion or word of mouth marketing. Yet, your business would have 5 fewer sales and a significantly lower conversion rate (1.5% vs 20%). Better, we would argue, to have a high conversion rate, more revenues, enhanced cash flow, and the opportunity to build relationships with five more people.

So much effort is wasted among entrepreneurs to get traffic–and not just in an online sense–that very little is left to think through conversions. Conversions are a better predictor of long term success than impressions. Get this thought into your psyche. It can make the absolute difference between success an failure.

Matthew Toren, founder of Young Entrepreneur, offers the following 5 tips for lead nurturing:

1. Be a problem solver. You have to admit that at least part of business success has to do with the timeliness of your products or services. You must answer people’s needs. The key is settling into a business that has problems you really love to solve, with customers whose pressing needs you are very good at addressing. When you’re able to identify your niche, you don’t only go out there to earn, you have a unique passion and an offering that suits the needs of those people.

2. Get into your customers’ psyche. People buy not only because they need things, they often buy to satisfy something deeper in them. It’s often the feeling they associate with a product that they finally make the decision to buy. Everybody needs a pair of shoes, but not just any shoes can satisfy that need. This is when branding, reputation and customer service come into play. In fact, this is why there is marketing in the first place. Get into what excites and interests your target market. This is the only way you can tailor-fit your campaign to the people who would not think twice of paying for what you have to offer.

3. Where are your customers? In online marketing, determining how your market interacts with the Internet is very important. It gives you leads to “where” they are online. Online behavior can point you to what sites they frequent, the social-media networks they prefer, the news they’re more likely to read and so on. If you know where they are, you can be sure to focus on places you need to have a commanding presence. This assures you of a steady stream of traffic of ready-to-pay customers, and it prevents you from effectively barking up the wrong tree. We all know how costly and time consuming that can be.

4. Do you really know them? To really pinpoint who your target customer is, you’ll want to dig in deep… find out how they tick, if you will. The key is to learn about them, even change with them over time. So basically, this means you can’t just buy one customer list and operate off that in perpetuity. You’ll need to continuously find out about your target audience. Are they reading things you should be reading? Do they shop at stores you’ve never heard of? All of these puzzle pieces could fit together and help you identify the bigger customer picture, if you’re willing to spend time accumulating them.

5. Close in on the deal. Once you know your customers and understanding where they are and how they think, you can specifically design an online marketing campaign that appeals to those people who would love to pay for your products or services. By being a problem solver, you’re forced to know yourself and understand your brand’s strengths and weaknesses. But understanding who you want to engage with online really seals the success of your business.

Market Your Way to the Top

Businesses who are ineffective in conveying their mission and product offering  to the marketplace simply cannot effective and efficient enough to wring profits out of insufficient revenues. Image may not be everything, but it can mean a great deal in terms of buyer perceptions that influence purchasing decisions. Clearly, not every business can be recognized as the “best in category.” However, you can continuously improve your market position by marketing and positioning your company as one that fulfills its mission and satisfies customers. The public must know your company and its offering!

Name Recognition

One goal for keeping a business strong in its marketing efforts is to increase name recognition. Keeping the company–and often one or more of its top executives–in front of the local “players” (centers of influence who will talk you up) can provide tremendous benefits; when these individuals refer or bring a client to you, it is because they:

  • know you,
  • know your reputation, and
  • trust you to do a good job for their friend(s).

Other means of getting the word out include building a thought leadership role through public speaking. If you are not the type who enjoys standing in front of a room and attempting to engage them in a conversation, you may be more comfortable as a panelist or panel facilitator. Through active participation in community groups, you are afforded a unique opportunity to discuss your company’s success and how your core values, product offerings, and service standards are opportune for the listener or someone they know. 

Customer Research

The customer must be researched continually, paying particular attention to discriminating tastes and preferences. Your sales team should be your best source of information as to what buyers seek. Research reports should compile information gathered from key figures in your community–those “centers of influence” who are gateways to networks of potential buyers for you. Study what you find out with an eye towards possible adjustments in product offerings as quickly as possible; the key here is to beat competitors to the punch. When you meet new prospects, ask them questions about what they like, try to keep a running tab of demographic trends about them, and find out what may be holding them back from purchasing from you.

Marketing Trends

Attend industry meetings for either your vertical market or the markets in which your customers are likely to hang out–better yet–do both! Stay abreast of trends in the market, listening carefully for changes in design, pricing, or delivery. This information can serve as a launching point for later team discussion back at the office of how to “up your game.” On at least a quarterly basis, someone should “shop” the competition, pay attention to how they operate and promote, so you can glean strategic insights. Chances are high that, armed with better information, you will make significantly better decisions!

Weighing the Competition

Ask your management team what they hear about competitors from suppliers, attorneys, CPAs, banks, and the like. It can be very helpful to keep spreadsheets listing others’ products, price points, features, and promotional incentives. By monitoring these over time, your team begins to get a feel for where the competition feels the market is moving–and you can adjust your own planning accordingly. Try to figure out how many employees your rivals have, as well as their real estate expenses, number of sales or distribution arrangements, and other key metrics. Watching these statistics from one measurement period to another can provide you with opportunities to win market share. When you have a feel for what obligations the other guy has, you can estimate their break even point, which translates into pricing policies, potential availability of financing, and many other factors critical to your success!


Get More Sales on Purpose

To support your team and finance operations, an executive team must be able to generate large volumes of revenue throughout the year. This revenue generation takes place through a combination of marketing, sales, and service. The customer has to

  • know that a product is available (marketing)
  • be convinced to buy that product (sales), and
  • be pleased with the purchase (service).

We have been discussing how research leads to better product positioning, and that is certainly an important part of marketing. We will zero in on the other components of revenue generation in this edition.

Many companies assume that all they have to do is make a product or offer a service and everything else will fall into place. Nothing could be farther from the truth! If no one knows who your company is, what the offering is, and how/why to buy it, you will either have inventory (goods) or idle workers (services). Similarly, if buyers know your business has something to offer but have no reason to purchase your offering over another’s, you will not make sales critical to business survival and growth. Providing a quality product in a timely manner an correcting defects quickly translates into repeat sales in any industry. 


Sales depend on three critical elements:

  1. the quality of leads
  2. the quality of the sales team
  3. buyer perceptions

The three need to converge into transactions built on relationships. Buyers are like pupils in an educational system–the sales team and the marketing team are the teachers. The marketing team must supply enough information so that the target buying market can learn about your offering. What is supplied to the sales team is information to reinforce the message: these products or services meet a distinct need in the mind of the buyer. As feedback is collected from target buyers, those conversations become a means to qualify leads that are much easier to convert.


Inform the general buying public both directly (in face to face situations) and indirectly (in various forms of media, including social). Failure to reach either audience results in insufficient leads for the sales team–both in quality and in quantity. If your marketing team is not accountable for lead generation, it should be. Those who do not perform the lead generation function well should be replaced with others who are tuned into what makes your business continue to exist: revenues. The marketers can improve effectiveness by paying attention to statistics–whether it is website inquiries, newsletter subscribers, store visitors, or something comparable. There has to be several metrics in your setting that you can identify that make the conversations very professional an on point all the time.


Think through things like your incentive programs for your sales team, but don’t neglect to think through how to equip the individuals for success with well produced collateral, clear messaging and selling tactics, and sufficient training to overcome potential objectives smoothly and respectfully. Appreciation notes to customers are an art that has lost ground, but that demonstrate a personal touch that often leads to new customers. In your training sessions, emphasize product or service features, how and why they are important, how you have positioned your offering versus the competition, what your perceived competitive advantage is, what common objectives are, and how you want prospects to be treated when in a consultative sales conversation.


Buyers also need to be instructed about what they encounter. Make an effort through both marketing and selling activities to run through the competitive advantage positioning messages that you have developed. Be consistent. Be passionate. Be sensitive. Emphasizing your research findings as to what potential buyers want and how you have tailored your offering will go a long ways to build identification with your company and its product or service. Think about where the buyers hang out and “meet” them with a compelling invitation.

Service will be tackled in the next post!