Are you sharing teeth in your operation?
Three old men are at dinner. They have a splendid
meal – steaks, baked potatoes, veggies. But they
have a problem. They have only one set of teeth.
It’s going to take them a while to eat. I’ll let
you imagine whether they share a little at a time
or one finishes before passing the teeth on. Gross,
Sharing teeth is not efficient. It creates a bottleneck
at the dinner table. How many of your employees
are sharing teeth? In the recycling industry, we
tend to be cheap because we’re bootstrappers. And
many of us have had little training in decoding
the financial and operating metrics that could
show the costs of sharing teeth. Couple that with
our aversion to debt, and it’s easy to see why
many of us have employees sharing teeth.
How can this help you make more money?
When I was an auto recycler, we shared teeth for
a long time. For years, we had three dismantlers
and one forklift. The dismantlers always wanted
another forklift. They often waited for 30 minutes
or more because the forklift was tied up unloading
a transport truck or doing other duties. While
they waited, they would divert their efforts to
a lower productivity task or just take a break.
They had asked for the forklift and I had dismissed
their request as whining. Eventually, however,
I listened, and I studied how long they waited
to use the forklift.
I asked them to tell me how many additional cars
they could process per week with a second forklift.
When I reconciled their numbers against how many
minutes were lost per day per employee, buying
another forklift was an easy decision. The forklift
decision was good because we could dismantle the
extra cars using our existing bays more efficiently
since we could not add any more.
Doing this exercise with my employees and considering
how a second forklift might alter the other metrics
of my business is part of doing bottom up budgeting.
I used the same method when we were struggling
to hit sales targets. Using bottom up budgeting
helped me see that sales growth required hitting
delivery targets. Eventually, we realized we needed
another truck. Later we improved per driver deliveries
by changing compensation from hourly to pay per
stop. After these changes, our dismantlers and
drivers made more money, and we earned a higher
return on assets.
Understanding metrics and changing my employee
compensation plan helped my business grow at the
expense of my local competitors. Where did I learn
to use metrics and get the pay per stop idea? I
belonged to a group of auto recyclers that met
twice a year to compare metrics and discuss successful
business growth techniques specific to our industry.
One of the other members had much better metrics
for per driver deliveries than the rest of us.
He shared the idea with the group, and I made a
lot of money applying it.
If your business could benefit from fresh ideas
to lower costs, raise revenues, and increase profits,
join an industry specific Peer Benchmarking Review
Group. If you would like to learn more about how
to use metrics to manage your business better,
I will be facilitating these groups for recyclers
and other industries in coming months. To make
certain that these groups are made up of non-competitors,
we are limiting participation to one business owner
in each market.
Don’t forget to subscribe to Ron's
free monthly auto recycling e-newsletter, with
news and tips, register at www.autosalvageconsultant.com.
Remember, only you can make BUSINESS
Ron Sturgeon is past owner of AAA
Small Car World. In 1999, he sold his six Texas
locations, with 140 employees, to Greenleaf. In
2001, he founded North Texas Insurance Auction,
which he sold to Copart in 2002. In 2002, his book “Salvaging
Millions” was published to help small business
owners achieve significant success, and was recently
reprinted. In June 2003, he joined the new ownership
and management team of GreenLeaf. He also manages
his real estate holdings and investments. You can
learn more about him at WWW.autosalvageconsultant.com
He can be reached at 5940 Eden, Haltom City, TX
76117, email@example.com or
817-834-3625 ext 6#.