I liked school, and generally was a good student and kept my grades up. But being more the creative type and not a number cruncher by nature, math was never my favorite subject. Still, with only very rare exceptions, I kept my scores in A’s and B’s, in all subjects, all the way to high school.
At good old Pine Tree ISD, high school began in the 10th grade. Sophomore math, I soon found out, was geometry. As luck would have it, I ended up in the classroom of the toughest of the two sophomore math teachers, the infamous Mrs. Wright. She was well known for her no-nonsense style of teaching, and her high expectations for her students.
To my surprise, geometry was the one math subject that was right up my alley. Since it deals with shapes and angles, and other things you could see and that made sense, it was soon my favorite subject. Even more surprising was the fact that my test scores were virtually perfect at the first six weeks report card, and they stayed that high all year.
My junior year we had Algebra II, and I committed myself to mastering that if I could. Mr. Houston, a math whiz of math whizzes, was a great guy and a good teacher. The first half of the year I stayed with him step for step. I began to think that I had been wrong about math after all.
But, then the second semester started, and we began to learn about abstract mathematics, graphing problems, working on mathematical matrixes, and other things that my brain was not in sync with at all. My grades plummeted, and the last two six-week report cards of that year I barely passed. So much for my career as a mathematician.
The one thing I have to admit about numbers, is that numbers, figured correctly, never lie. My grades didn’t lie either, and proved where my strengths and weaknesses were. But numbers in general are something we can count on, and in business there are many times we just have to let the numbers tell the story.
Unfortunately, our sign business story in 2008, according to the numbers, was not a very good one. We were busy most all the time, since most of 2008 was pre-recession, and our sales were up from the year before. But did the rest of you notice just how expensive things had gotten, especially that year? From aluminum to steel, from vinyl to freight to gasoline, everything really went up. On top of that, having expanded a bit, including moving into a new shop, our overhead and payroll went up that year as well.
So, in the end, just looking at the numbers my CPA gave me when I filed our taxes for 2008, that year was not a good one for us, though it should have been. And if I put it in simple mathematical terms, our five-person sign business needed to have done another $1,000 per week in work and sales to have made that year make sense.
As it was, I had employees who made more take home pay than I did in ’08. Now let's see, more hours + more risk and investment = less money. Shucks, even someone as mathematically limited as I am can see that something here just doesn’t add up.
Now, would it have been possible, in a year where we had plenty of work coming in, for a five-person sign shop to have produced another $1,000 per week in sales without adding any staff? Just how hard would that have been to accomplish?
Hmm, if a salaried employee routinely comes in 10 or 15 minutes late, say four times a week or more, that would add up to nearly an hour per week in lost productivity. And at $75 per hour shop rate, just improving on this one small problem would amount to an increase of $75 per week in productivity, or close to $4,000 annually.
Three or four personal phone calls a day, of even five minutes duration could add up to at least that much if multiplied by 250 workdays in a year. Having cell phones around the shop just about guarantee regular losses of this type. What about the productivity lost when staff members check personal e-mails or do some internet searching on company time, or take a lunch hour and then bring in lunch and eat it on the job? And visiting with chatty customers, and chatty UPS drivers? (Can you believe we have one of those?)
So let's do the real math, and I’ll leave me out of the equation and calculate the numbers for just four employees. The equation would look like this: $50 x 5d x 4s x 50w = x.
That is, by making a few simple changes, if each employee increases his/her production by just $50 per day x 5 days per week x 4 staff members, we could easily produce an increase of $1,000 more sales per week. Multiply that times 50 work weeks per year and we are there already, gross revenue up a total of $50,000 annually!
Gee, I think that Mrs. Wright, my old math teacher, would be proud. Wait, we’re not talking geometry here. That was algebra. Mr. Houston would be surprised to know he had taught me something after all, regardless of how that last semester went.
Actually, he probably wouldn’t believe it. But, that doesn’t matter, I just have to get the crew at Rick’s Sign Co. to believe it, and I actually think they will. I know they really are a good crew. They want us to succeed, and they’ll understand.
And, after all… numbers never lie. Have a great month, and a productive rest of 2009.