Karen Fischer

Business Productivity Measures Made Simple

July 29, 2014



Ever wonder how productive your organization is?

We have consulted with many businesses and found that on the average, businesses are less than 50% productive. This usually comes as a surprise to the business owner. After the surprise is digested, the usual follow up question is: How did you come up with that number. Here’s how I did it.

  1. Determine how billing for revenues works. If it’s by the hour or quoted by the job, ask, how is the price worked out for the work being provided and how many people are needed? I ask this since there are usually 2 major components to a job – Time & Materials.

  2. Determine what amount of all the revenues are materials and what amount is labour. Here I make an assumption that there is an average of 2,000 hours per person employed (either full time or contract – it does not matter at this time)

  3. So let’s say that it is determined that there is revenue generation of $1,000,000 per year. Also assume 50% of that is materials and therefore you have $500,000 each in Material and Labour Revenue. (note: each business will be unique, and therefore differing numbers)

  4. Determine what the billing rate is for their labour. This was identified in step 1 above. So if they are billing $100/hour then $500,000 in labour revenue was delivered through 5,000 hours of billable effort. (emphasis on “billable”) You can calculate that you need 2.5 (5,000/2,000) people to deliver the value-added effort. Note: “Value Add” is what the customer is willing to pay for.

  5. Next, determine who is on payroll that actually does the work. I eliminate the owner (or only use a percentage of the owners time), the office manager, the accounting staff etc. I am usually left with a number that resembles 6 or 7 employees.

  6. Taking your 2.5 value-add employees and dividing it by 6 payroll employees gives you a productivity of approximately 42%. This is not a scientific calculation that would be used by an industrial engineer, but it works from a business sense since only 42% of my labour capacity is actually being billed for value-added activities, or as I say – being “Productive”.
This starts a very important conversation. What should that number be? After all there is shop time, travel time, material pickup and delivery and other time elements that the employees need to take into consideration in ‘working’. I call this “busy-time” which is quite different than “productive-time”. The issue here is that 1) the owner is very surprised at the 42% number, and 2) the owner realizes they really do not know what their employees do all the time, or at least 100% of the time.

I have found when taking all the ‘support’ items into consideration a comfortable number for most small business was in the neighborhood of 70% to 80% productivity. What the owner also realized that perhaps they were not pricing profitably; or organizing their schedules accordingly. Here’s an example.

One client received most of their work orders on Friday afternoon, Monday and Tuesdays for delivery later in the week. We determined that working 5 days at 7.5 hours each day was not as productive as 3 days at 12 hours each. Overtime was reduced as well since the extra hours normally worked on Wednesday and Thursday nights was not required. Also, repeat trips to site were reduced as more work was done at each site during the day thereby reducing (but not necessarily eliminating) the number of returns to finish the job the next day. The client also introduced travel time charges that were more in line with their labour rates in addition to their fuel and maintenance costs.

Do the simple 6 steps outlined above to see where you are on the productivity.
 

LinkedIn - The Value of Their Post Blog Feature

July 26, 2014

Blown away is putting it mildly of how I felt this morning after posting my first post on the New LinkedIn Feature Blog Post feature. I  had noticed this feature was available a few months back as I watched my peers  and connections using it. I soon  began wondering why  as a  paying customer with a Premium Account why those that are paying nothing are receiving valuable features before those of us that pay. I was especially tickled at the young woman on their support desk's reply that as a P...
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Nurturing the Sale Funnel Using Social Media

July 22, 2014
About the Guest Contributor

Russel Cooke is a Customer Relationship Management (CRM) expert and journalist living in Louisville, KY. His work often explores globalization, business relations, software development, and social media. In his free time, he enjoys hiking, spending his time with girlfriend, and fretting about hockey.

Since its invention, social media has slowly but surely infiltrated the lives of all its users. For a medium meant to connect people together over a site-specific interf...

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Finding The Hidden Costs of Choosing a Manufacturer Outside of Canada

July 6, 2014

I spent time with a client this week and a local manufacturer that is producing their new product.  The reason for the meeting was to understand all of the costs to help the client figure out how to price the product to market.  As we sat there talking about different scenarios with the manufacturer, I started asking myself why we have become brainwashed to automatically think about shipping our work overseas for a better price. This is definitely true if we watch the Dragon’s Den because t...

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Have You Truly Invested In Your Business from the Start

June 12, 2014
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When many small business owners start their business, one of the first things that they usually do is look for financing for their business.  When one applies loan, the lender will want to understand a breakdown of how you will use the money.  In most cases the owner is thinking about the capital equipment they need, a mortgage or lease, as well as the inventory for the first month of their business.  In many cases, they completely forget about including funding to cover marketing and genera...

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So You Thought The New Anti-Spam Legislation Was Going to Stop Spam

May 14, 2014


Do you find yourself attending a network event and get home to find that you are now on everyone's distribution list and are being spammed or get emails daily from SEO companies in India?  If you believed the new Canada anti-spam legislation was going to save you, you are mistaken. The new legislation as defined, will require each business owner  to hire their own lawyer to explain all the caveats to them as well as additional people in order to track every email they send to ensure complianc...

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The Math of Bad Service

April 12, 2014



Ever wonder why you get bad service from “customer care call centers”? Blame it on math.

Often customers are talked about as being an investment to the firm. It is easy to understand; a company invests marketing and sales dollars to acquire you and through the money they make from you they can pay for the goods and services they deliver to you. This provides the ROI in the customer investment. In a commodity market such as telecom, it can take anywhere from 6 months to 2 years to see profi...

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Lobbying for Small Businesses in Canada

March 27, 2014


For those small businesses who have not heard of the CFIB or those that are not sure if joining is worth the cost,this article is for you. The greater question to ask yourself - Can you afford not to join. If you are a business that has employees beside the business owner, not joining could end up costing your business greatly in the long run. The CFIB is the Canadian Federation of Independent Business which is an organization that lobbies and advocates on small business owner's behalf agains...
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Changes to Klout Help Business Owners with Content Marketing

February 14, 2014



If you have not used Klout or are not familiar with the tool , it is a social media platform that tracks all of the interactions that you have on Social Media.  When it first was launched, I joined out of curiosity based off friends of mine in the business community sharing the information about Klout scores on LinkedIn. It started out providing a "social media score" for you as an individual, which was  based on the interaction on your Social Media platforms that you utilized.  Though I will...

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Blog Series - 2 Tools to Help You in Your Small Business #2

February 12, 2014



Two Tools To Help You Develop Video Content For Your Small Business


This is the second in our series on Tools to Help You In Your Small Business. The focus of this article is on tools that you can use to generate Video Content for your small business online.


PowToon Videos 
PowToon is a fairly new software as a service offering which allows businesses to develop content videos utilizing animation which are widely seen today in a lot of business videos. There is a free offering as well as two pre...
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About Our Canadian Small Business Blog


Our Canada small business blog provides you with articles and small business advice across different areas of your business and in support of our small business consulting and small business coaching practice. Our business focus is on providing small business content and advice to small businesses in the Canadian market. Our only focus is on Canadian small businesses or businesses outside of Canada who want to do business and provide new jobs to Canadians, but welcome visitors from outside of Canada in hopes that the advice we provide can help them as well. Visit us often, or subscribe to our small business blog Canada, as we will continue providing small business advice, small business tips , and techniques on topics of interest for your small Canadian business, whether you are a start-up or a mature small business. We would also be interested in hearing from you on small business topics of interest, or hearing questions that you might have in areas of your business.

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 We are located in Durham Region, but are able to provide business coaching and business consulting across Canada.  Our local service area includes Oshawa, Whitby, Ajax, Pickering, Markham, Toronto, Richmond Hill, Newmarket, Vaughn, Aurora, Mississauga, Brampton, Oakville, Clarington, Peterborough, Lindsay, Port Perry, Uxbridge, Bowmanville,, Guelph, Barrie, Waterloo, Kitchener, Waterloo and surrounding areas. Outside our local area, most consulting can be done remotely, but when it cannot , travel and living expenses will be applied as required.


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