Protecting Your Profits
While bottom lines have been hammered for every company during the past six months, privately held companies in the U.S. are still above water, based on gross profit margin, net profit margin and change in revenue figures. Here’s how several CEOs across a range of industries have worked to protect both their top and bottom lines:
- Construction—“The most common way to make money in construction is to drive
revenue as high as you can by taking on bigger projects, then getting them done as
efficiently as you can. In this economy, that’s hard to do. Fortunately, we have always focused on niche markets that require expertise for which we get paid high margins.”—Jim Ansara, Chairman, Shawmut Design and Construction.
- Manufacturing—“We’re looking to trim labor costs in an agile way. Rather than laying people off, we’ve cut costs by bringing jobs in-house that we used to outsource. That way we capture all the benefits of the increased productivity of our workers,”—Jake Nichol, CEO,Leatherman Tool Group.
- Retail—“Our goal is to turn over our inventory four times a year. We’re working more closely with our manufacturers to shrink our development time and buy closer to the market.”—Lexy Funk, CEO, Brooklyn Industries.
- Professional, scientific and technical services—“Our biggest cost by far is the
cost of our people. That’s why I pay close attention to the ratio of total compensation to total revenue. If that number gets below 50, then we’re working people too hard, and they’ll start quitting. If the number gets to 60 or above, we’re not making any money,” —Chuck Porter, Co-Chairman, Crispin Porter + Bogusky.
- Wholesale trade—“To make money, we have to manage our variable costs, such as shipping and trucking. When gas prices spiked, we had to suddenly get very creative with our routes. We also ask our buyers to pay in advance. That way, we can take our interest-rate spread out of the mix,”—Jeff Hoffman, CEO, Enable Holdings.
Sources: “The Profitability Report: How to Protect Your Margins in a Downturn,” Inc.