Step back and have a neutral look at your business /
careerChapter 10
p.7
I deal with so many customers and products. How do I know which is the best? How can I find out where I can get the best returns?
Don’t make the mistake of thinking that all your products and customers are necessarily profitable and “good business”. From time to time it is essential to step back and have a realistic and neutral look at your business.
The diagram below is an example of a “Kanthal Curve”. See it as a tool that can help you to view your business and
career from a distance.
It will enable you to answer questions like:
Are my bigger customers really my better customers?
What will be the effect if I spend the same effort onother customers?
Am I really optimizing my resources?
How does cost and activity compare?
But I don’t know how to draw a curve like that! What do I need and where do I start in order to do this?
Before you can plot a Kanthal Curve for your business, you have to analyze your business and obtain realistic and adequate information.
Just follow the steps on the following page…
STEP 1: Write down all the costs
In the case of a salesperson, costs will include the following:
Your full package translated into an hourly rate.
Costs of all who make a contribution to your sales effort: Sales coordinator, team leader, team, admin, etc.
List infrastructure costs that relate to you which are not included in your
hourly tariff.
Any other costs.
STEP 2: List your Top Ten in terms of sales for each of the following:
Products
Suppliers
Customers
STEP 3: Split all the cost elements per customer, allocating as best you can.
Be as honest as you can, otherwise you’ll simply engineer the results you want! Beware of foregone conclusions.
Total
Customer 1 Customer 2 Customer 3
A
Sales
B
Gross Profit
C
Own time x package
D
Other time x cost
E
Infrastructure cost
F
Other costs
G Total cost
(C+D+E+F)
Nett profit
(B-G)
STEP 4: Repeat for products, services, suppliers, etc.
(Use the same method as above)
STEP 5: Plot the curve, starting with the customer
(or product, service or supplier yielding the most net profit and ending with the least profitable.)
Your Kanthal Curve gives you a clear picture of the business performance of your customers, products, services, suppliers, etc.
Now you can analyze good business/bad business…
Analysis of good business / bad business:
Start with your worst performers.
Why keep them?
What areas of improvement can you identify?
Discuss with your customer if he is part of the solution
(eg. pay for service calls, change buying patterns, etc.)
Develop SMART action plans and implement.
Remember that the answers are never in the obvious.
Step back and have a neutral look at your business / career
Chapter 10 p.7
I Ask
I deal with so many customers and products. How do I know which is the best? How can I find out where I can get the best returns?
I Answer
Don’t make the mistake of thinking that all your products and customers are necessarily profitable and “good business”. From time to time it is essential to step back and have a realistic and neutral look at your business.
The diagram below is an example of a Kanthal Curve. See it as a tool that can help you to view your business and career from a distance.
It will enable you to answer questions like:
- Are my bigger customers really my better customers?
- What will be the effect if I spend the same effort on other customers?
- Am I really optimizing my resources?
- How does cost and activity compare?
I Ask
But I don’t know how to draw a curve like that! What do I need and where do I start in order to do this?
I Explain
Before you can plot a Kanthal Curve for your business, you have to analyze your business and obtain realistic and adequate information.
Just follow these steps:
STEP 1: Write down all the costs
In the case of a salesperson, costs will include the following:
- Your full package translated into an hourly rate.
- Costs of all who make a contribution to your sales effort: sales coordinator, team leader, team, admin, etc.
- List infrastructure costs that relate to you which are not included in your hourly tariff.
- Any other costs.
STEP 2: List your Top Ten in terms of sales for each of the following:
- Products
- Suppliers
- Customers
STEP 3: Split all the cost elements per customer, allocating as best you can.
I Advise
Be as honest as you can, otherwise you’ll simply engineer the results you want! Beware of foregone conclusions.
|
Total
|
Customer 1 |
Customer 2 |
Customer 3 |
|
A
|
Sales |
|
|
|
|
|
B
|
Gross Profit |
|
|
|
|
|
C
|
Own time x package |
|
|
|
|
|
D
|
Other time x cost |
|
|
|
|
|
E
|
Infrastructure cost |
|
|
|
|
|
F
|
Other costs |
|
|
|
|
G Total cost
(C+D+E+F) |
|
|
|
|
|
Nett profit
(B-G) |
|
|
|
|
|
|
STEP 4: Repeat for products, services, suppliers, etc.
Use the same method as above.
STEP 5: Plot the curve, starting with the customer
or product, service or supplier yielding the most net profit and ending with the least profitable.
I Explain
Your Kanthal Curve gives you a clear picture of the business performance of your customers, products, services, suppliers, etc.
Now you can analyze good business/bad business…
Analysis of good business / bad business:
Start with your worst performers.
- Why keep them?
- What areas of improvement can you identify?
- Discuss with your customer if he is part of the solution (eg. pay for service calls, change buying patterns, etc.)
- Develop SMART action plans and implement.
I Advise
Remember that the answers are never obvious.
Tagged as:
Business Career,
Cost Elements,
Curve,
Engineer,
Foregone Conclusions,
Good Business,
Gross Profit,
Hourly Rate,
Infrastructure Costs,
Mistake,
Nett,
Own Time,
Products Suppliers,
Sales Coordinator,
Sales Effort,
Salesperson,
Step 2,
Step 3,
Tariff,
Team Leader
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