I wanted to share a case study with you about a company we’ve been working with who was struggling with some internal issues that resulted in poor financial performance. We were called in to help solve these issues and improve the bottom line. The result, a 135% increase in profit.
Here are steps we took to drive results...
Determine the right KPIs
The first thing we did was to determine the true drivers of the business and what KPIs mapped to those drivers.
If you're new to KPIs (key performance indicators) head over to a comprehensive post about KPIs here.
The business was a service business and like all service business, they sold people’s time, so billable hours (which translates to billable dollars) became the main KPI that we measured.
There was also a minimum threshold of dollars that had to be billed on a monthly basis in order for the business to be profitable.
Luckily, the company had a system in place to track everyone’s billable time so the tracking piece was done.
Note: If you are a service business and you are not tracking everyone’s billable time consistently, being profitable is going to be really difficult.
After looking at this KPI we noticed that even though people were tracking their time as “billable”, not all those hours were truly “billable”. The team then performed a bit of clean up around how billable dollars were tracked so we could get to a good number.
Note: Often when you begin to dig into the KPIs of your business, what you thought to be true often isn’t. It's all part of the process.
Set a target & measure weekly
Next we determined a weekly target for the KPI “billable dollars”. This was the number that had to be achieved if the company was to have a profitable week. We began to notice that some weeks were below the target. The team then began to dig in to determine the root causes.
Determine the root causes
Each time the weekly result for the KPI “billable Dollars” fell below the target, the leadership team got together to determine why. They really dug in and began to bucket the issues in various categories.
This analysis gave the team more ownership and more of a feeling of control over the situation. They now knew WHY the target wasn't being hit and put an action plan to do something about it. They literally had their hands on the lever that drove profitability.
Note: I get that often it’s not that simple. There may be multiple levers, but knowing which levers (KPIs) drive value is critical. If you can place this in the hands of your team to execute…even better.
Once the root causes were determined, the team brainstormed around ways to improve the weekly revenue. Much of the solution involved letting each team members know what their revenue target was so each member could prioritize correctly. Other solutions involved improving the scoping of projects and distribution of work. Could certain projects be staggered or even run in parallel to maximize the team resources?
The team understood that this was something that needed to be constantly monitored and adjusted and as a result felt more in control. This in turn increased their confidence, morale and results.
Get the entire team involved
The leadership team then began sharing this information with the broader team to educate each employee on HOW what they did on a day to day basis affected the over profitability of the business.
We developed a weekly KPI dashboard together that allowed them to view the revenue KPIs along with associated weekly costs KPIs so everyone could see how the profitability KPI was tracking.
The final results were pretty staggering. By just focusing on that one KPI of the business profitability increased by 135%!
Do you understand the key drivers of your business? What KPIs do you monitor to ensure the business is profitable and generating cash? Do you have a KPI dashboard that allows you and your team to review those KPIs drivers on a weekly basis and warn you when it’s time to take action?
If you need help in any of these areas, we’re here to help. We’ve even developed a software product that allows you to track your KPIs, goals and initiatives, aligning your time and driving results.