October 2004              return to the newsletter contents page

What Employees Don't Know About Profit Can Destroy Your Business

According to a recent article in Fortune, the majority of business managers don’t understand the basics of profitability management. As a result, they are often taking actions that they think are helping the firm, but are actually reducing profits. 

As an example of this, ask yourself if your employees could answer the following questions:

• If prices are lowered by 5%, how much more does the firm have to sell to keep profit from being reduced?

• Which would produce more profit, increasing inventory turnover by one turn or lowering expenses by two percent?

• What is a reasonable level of profit as a percent of sales?

• How much can the firm afford to spend on payroll in relationship to the gross margin that it generates during the year?

These and many other issues are ones where managers typically make mistakes in their thinking. The mistakes are not minor. Each year, they cost every firm a substantial portion of their potential profits.

SEDA has a solution to the financial understanding challenge. It is a new computer-based educational program called Improving the Bottom Line. It allows every employee to experience a multi-media financial training program.

Of greater importance, it is not a generic training program.  Instead, it allows every firm to train its managers using the company’s own financial results.  In fact, every branch or division manager can have a program tailored to the results of the individual division.   

With this program every manager can take advantage of financial training at their own pace—fast, slow or in between.  In addition, managers can train at home, at work or on the road.  They can also train for as long as they want, for three minutes to three hours, depending upon their schedule.  In short, every firm will have a program tailored to its own unique needs.

Improving the Bottom Line has three modules, each about three hours in length.  They are designed to help every manager gain a better understanding  of critical financial issues:

• Don’t Know Nothing About Profit—This is an introductory session for managers who are not sure what inventory turnover really means or how to evaluate the average collection period. In most businesses this includes the majority of the managers and virtually every sales person.

• The Profit Drivers—This represents the heart of the training program. The module reviews how factors such as price, sales and expenses impact profitability.  It also covers topics such as GMROI, the PPR and some other crucial topics that are almost always misunderstood.

• Getting Serious About Profit—An advanced module that helps managers begin to plan their business and also understand the critical issue of cash management.

Improving the Bottom Line is a program that your managers will use over and over again.  It is available from SEDA for only $500. Contact SEDA headquarters for ordering information.