The Owners Brief: Waste in Your Business
The Cashflow Contractor Podcast • Martin Holland & Khalil Benalioulhaj
The Big Idea
Cutting waste is often worth more than new sales.
Five Points Worth Knowing
1. A dollar saved beats a dollar sold
With a 35% margin, you have to sell $2.86 to bring $1 to the bottom line. With a 20% margin, you have to sell $5. But a dollar of waste cut from expenses is a full dollar to the bottom line. Many owners want to double their sales, but double sales achieved through anemic margins could easily put them out of business. Martin’s advice: get efficient first.
2. Run the 1% test
Take your profit and loss statement and improve every line by 1%: sales up 1%, each cost down 1%. Write down how much each change adds to profit. The line with the biggest result is where to start. As Martin says, there’s 1% available in everything.
3. Waste hides in plain sight
Contractors often tell Martin they have no inventory. Then they walk into the shop and find $250,000 of materials sitting on the floor. Return extras to the supply house and let them hold the stock. Khalil adds that unsent proposals and invoices are inventory too.
When that “vital” employee leaves, wait before refilling the position. You may find a more efficient way to get the job done.
4. Doing more than asked is waste
Martin’s father taught him that a company can’t add value, only cost; the customer decides if it’s worth it. Think of the microwave buttons nobody uses, or a cabinet shop that finishes the backs of drawers that no one sees. Khalil points to the waste inherent in owners saying: “we’ll throw that in,” or who include three rounds of unnecessary reviews, and a weekly report nobody reads.
5. Mistakes and wasted talent start at the top
Martin’s favorite advice to clients is: “Don’t make any mistakes. That’ll be $500.” That advice seldom works. The real fix is designing work so it can’t be done wrong, like a flat-pack desk where the parts only fit one way. Khalil says repeated mistakes point to the system or the owner, not the worker. And if someone can do a job 70% as well as you, delegate it, or your business will never grow beyond your personal capacity to get things done.
In Their Words
“It’s impossible for a company to add value to a product. They can only add cost.” — Martin Holland
“Waste really is where your opportunity is.” — Martin Holland
Try This
Run the 1% test on last year’s profit and loss statement.
Walk your shop and count what’s sitting there.
The next time someone leaves, wait before refilling the role.
Anneal Business Coaching • annealbc.com