FROM THE DESK OF Karen DON’T IGNORE PROFIT MARGINS D ive I nto the N itty -G ritty of Y our F inancials MAY 2 0 1 8 #DramaFreeHR News
Welcome to the first edition of our newsletter! Personally, I am so excited to offer you something beyond just the “HR stuff” we talk about every day, because our lives are certainly made up of much more! Most likely, each issue will have a story about my hounds — outside of HR, they are my passion and joy! We started adopting retired racing greyhounds in 1996. We recently completed a road trip — 17 days, eight hotels, 2,800 miles — and the best part of the trip was the opportunity to reunite our newest hound (Craigie Coldshot, aka Copper) with his trainer and the folks in the kennel who took care of him for the two years he was at the track as a moderately successful racer. Talk about people with passion for their work! First turnout for the hounds is at 5:30 a.m. If a race day includes a matinee and an evening show, kennel staff work until about midnight! Our trainer knew every hound in his care , and he remembered Copper as well. The amazing part was that Copper remembered him too! The trainer knows the likes and dislikes of every one of the dogs in his care. He has one little hound who will only eat her apples whole — if he cuts them up, she won’t eat them!
It can be hard to talk about business in an abstract context. That’s why we’ve created a fictional company in one of the country’s fastest-growing industries to illustrate how profit margins apply to growth. Castaway Brewing began as a small nanobrewery with wholesale distribution as their only means of generating revenue. They operated for a couple of years with very limited overhead after receiving gift funds to start their business, and they paid no rental fees for their workspace. Their brand was steadily growing, and their profits followed suit. The owners weren’t sure how to expand their operation and still sustain growth. They decided to take a close look at two specific profit margins to see the potential feasibility of long-term growth. MARGIN FOR BUSINESS A company’s operating margin is a measure of how efficient the business is as a whole. Operating margins are calculated by dividing a company’s operating income (total profit after expenses) by net sales. MARGINS FOR PRODUCTS Gross profit margin is an indicator of the profitability of a specific product. It’s calculated by comparing the revenue of the product to the cost of goods sold. Castaway only had three flagship beers, but the gross profit margins were substantial on every one of them. Wilson Pale Ale operated at a 60 percent margin, Bamboo Brown Ale at a 55 percent margin, and Sandcrab IPA at a 50 percent margin. With few employees, limited overhead, and three products that produced high individual revenue, the overall operating profit margin of the company was in great shape. With this foundation, the brewery was ready to expand and take on the giants in the industry. But first, they had to figure out their strategy.
Imagine working in a field you are passionate about. I’m blessed to do so every day of the year, and I’m blessed to have you here on the journey with me!
- Karen Young
Continued on page 2 ...
717-652-5187 • 1
... continued from cover HOW TO FIND YOUR MARGINS
HOW MARGINS FACTOR INTO DECISION-MAKING Let’s take Castaway’s decision to add the three new beers as an example. New products generate excitement, especially when they are only available for a short amount of time. But for any one of those new beers to be as successful as their flagships, they would have to produce and sell nearly double the product. This increases production necessity, which increases man-hours and decreases net revenue. BALANCING MARGINS WITH PASSION Perhaps the most challenging part of any growing company is balancing what’s best for the company with what its leaders are passionate about. The vision and the long- term sustainability of every business is
retail, you can produce and mark up the product on your own, thus putting more revenue back in your business’s pocket. The only caveat for Castaway was that a new location meant a lease for a workspace, which was an added expense. Production: The new production elements could also affect Castaway’s operating profit margin. More product means more production, more storage, more employees, and ultimately, more red to add to the bottom line. MARGINS FOR NEW AND OLD COMPANIES Margins for new companies and margins for established companies are much different. When you see a rapidly growing company, odds are that they are growing in total revenue but their overall profit margins are actually decreasing. In the instance of Castaway, they had limited overhead in the beginning, but as they expanded, liabilities increased. More employees, benefit programs, storage needs, and production caused their operating margins to take a substantial hit. •
T o compete with other companies in the local market, it was clear that Castaway was going to need new beers, a new location, and a shift in production. This meant operating costs were going to change, and all of their margins right along with it. Beer: They needed to find projected margins for the new beers. They decided to keep the three flagship brews year- round and expand by adding two seasonal releases and one specialty release. After calculating the costs of the raw materials, employee time, and miscellaneous debts, they calculated 30 percent gross profit margin for their three new products. Location: By opening a retail site, there was considerable potential for the overall operating profit margin to shift drastically. It’s much more lucrative to sell your product at retail than wholesale. When you sell at wholesale, you don’t get the luxury of marking up the product — the customer you sell to does. At • •
dependent on both of these concepts. Often, passion leads to decisions that cause weak profit margins, but focusing too much on margins can dilute your brand. A healthy harmony and balance between the two is key to success. Retain Employees, Retain Customers One Relationship You Don’t Want to Take for Granted
On the customer side of things, a Bain & Company study found that it is 5–25 percent more expensive to get a new customer than it is to retain a current customer. Considering all of these costs, why wouldn’t you do everything you can to retain good employees? Employee retention is critical for morale. When you lose one employee, it’s not uncommon for others to follow. Of course, it’s also critical to understand why employees decide to leave. This is where in-depth exit interviews can provide valuable data. Know exactly why employees are leaving, and you can fix the problem. Additionally, consult with current employees on what the business can do better. The more you know, the more you can do. Right now, there are people on your team who are thinking about leaving your company. A 2017 Gallup survey found that 51 percent of workers are thinking about leaving their current company. The biggest reasons include a lack of advancement opportunity, poor work-life balance, and high stress. A 2017 Mercer Global Talent Trends study found that 34 percent of employees plan to leave their current position within the next 12 months. Realizing the value of your employees contributes to the success of your business. When you’re proactive and willingly cultivate a positive work environment, you retain employees. All you need to do is remember this simple equation: Happy employees = happy clients.
When you have high employee turnover, chances are that you have higher-than-average customer turnover. This is a detail that too many companies overlook. If your business is customer-facing, your employees must build relationships with customers, and these relationships are key to retaining your customers’ patronage. When a customer-facing employee leaves your company, customers have to start over and build a relationship with someone new. Not every customer will be willing to do that. Their sense of loyalty has been eroded, and it gives the customer the perfect opportunity to look elsewhere for similar products or services. While employee retention is not the sole factor in customer retention, it does influence it, so examining your staff turnover rate is always a good idea. The costs associated with replacing an employee are high. You have to find the right candidate and train them. Couple that cost with the cost of losing a client, and you lose a significant amount. According to a 2015 ERE Media study, to replace an entry-level employee, it costs about 30–50 percent of that employee’s annual salary. Need to replace a midlevel employee? It costs about 150 percent of their annual salary. Get to senior or highly specialized employees, and the cost reaches about 400 percent of their annual salary.
2 • www.hrresolutions.com
The Incredible Journey of Bobbie the Wonder Dog Imagine America in 1923. Yankee Stadium opened its doors for the very first time. Walt and Roy Disney founded The Walt Disney Company. The first issue of Time magazine hit newsstands. President Warren G. Harding died of a heart attack in office, and Vice President Calvin Coolidge became the 30th president. And Bobbie the Wonder Dog trekked 2,550 miles to return home. Bobbie swam across numerous rivers. He trekked across the Great Plains and over the Rocky Mountains. While we will never know exactly what Bobbie endured, we know he made it home. Over 2,500 miles later, in February, 1924, a tired and beaten-down pup arrived home in Silverton, Oregon, to a stunned family.
Bobbie the Wonder Dog’s story made national headlines. He received a medal and the key to the city, and he became a silent movie star in the film“The Call of the West.”Today, you can visit Bobbie’s memorial near his home in Oregon.
Of all the stories to come out of 1923, Bobbie’s may be the most incredible. It all started with a road trip. The Brazier family of Silverton, Oregon, decided to take a road trip to visit relatives in Wolcott, Indiana. Mom, Dad, their two daughters, and their Scotch collie piled in the family Overland Red Bird touring car and headed across preinterstate-highway-system America. Several days later, after the Braziers had settled in with their Wolcott relatives, Bobbie the Scotch collie was attacked by a pack of dogs. The dogs scared Bobbie away, and despite a long search aroundWolcott, the family was unable to find any trace of the collie. The search continued throughout their stay, but time ran out, and the Braziers had to return home to Oregon without their beloved Bobbie. What the Braziers didn’t know was that Bobbie had been searching for his family as well. He may have been scared away, but he was determined to get back home. And so began his incredible journey. He turned his head west and began walking. And walking. With winter setting in, Bobbie had a monumental task ahead.
Take a Break!
Grilled
RANCH POTATOES
Ingredients
Ranch dressing for drizzling 1 tablespoon chopped fresh chives Bacon bits (optional) Salt and pepper to taste
2 pounds baby potatoes, halved 1/4 tablespoon extra-virgin olive oil Juice of 1/2 lemon 1/2 packet ranch seasoning
Directions
1. Heat grill to medium. In a large pan, toss potatoes with olive oil, lemon juice, and ranch seasoning. Season generously with salt and pepper. 2. Skewer potatoes. (If using wood skewers, be sure to soak in water an hour before grilling.) Grill until tender and lightly charred, about 15 minutes. 3. Drizzle with ranch and garnish with chives and bacon bits.
Recipe courtesy of FoodNetwork
717-652-5187 • 3
PRST STD US POSTAGE PAID BOISE, ID PERMIT 411
HR Resolutions 5441 Jonestown Rd. Harrisburg, PA 17112 717-652-5187
www.hrresolutions.com M–F 8:00–4:30
INSIDE THIS ISSUE From the Desk of Karen PAGE 1 Do You Know Your Company’s Margins? PAGE 1 Don’t TakeThis Crucial Business Relationship for Granted PAGE 2 Bobbie the Wonder Dog’s Incredible Journey PAGE 3 Take a Break PAGE 3 Grilled Ranch Potatoes PAGE 3 The Most Unique Customer Appreciation Ideas Ever PAGE 4 A little customer appreciation can go a long way — after all, everyone likes to be treated well by the people they do business with. But if your appreciation stops at holiday cards and birthday offers, you might be missing the mark. Summer tends to be the slow season, so take the extra time to plan a new way to show customers you care. HOST A SUMMER EVENT There’s no need to plan a black-tie gala. Summer is the season of relaxation, so keep it low-key, and let your clients know they are welcome to bring their friends and family. Here are a few fun ideas to consider: Host a barbecue at the office or local park. Make sure you have the proper permits first. Book a movie theater, and show the latest blockbuster. (We hear “Avengers: Infinity War” is pretty awesome.) • •
CUSTOMER APPRECIATION ISN’T SEASONAL Heat Up the Slow Months With a ‘Wow!’
• Plan an adults-only scavenger hunt. Include local landmarks, offer prizes, and provide grown-up beverages afterward to make the event really memorable. Throw a block party. This one requires some planning, but if you pull it off, your clients will talk about it until next summer! DELIVER ONE BIG ‘WOW’ Social media makes it pretty easy to keep up with everyone’s lives, so look for an opportunity to make a great impression on one customer. Maybe a client is expecting their first grandchild. Could they use a new stroller? Is a wedding anniversary coming up? Who wouldn’t love a limo ride and dinner at the nicest restaurant in the city? Go a bit over the top! People love to share stories on social media about the cool, unexpected things businesses do. Wouldn’t you like to go viral for a good reason? •
SEND CARDS FOR STRANGE HOLIDAYS
Sure, you mail cards during the winter holidays, but so does everyone else. Why not mail a card for National Doughnut Day on June 1? You can even include a coupon to a local doughnut shop. Or you can send a funny card with a picture of your office dog for National Mutt Day to announce that, thanks to your client’s support, your company is donating to a local animal shelter. These ideas may work great for your clients, or you might need to brainstorm a bit. Your clients are as unique as your company, so don’t hesitate to find a special way to show them you care.
4 • www.hrresolutions.com
Published by The Newsletter Pro • www.newsletterpro.com
Page 1 Page 2 Page 3 Page 4Made with FlippingBook Learn more on our blog