February 2, 2017

High Quote Hit-Ratios - Can Indicate Why We’re Not Making Money

--- Even With…. Especially With…. a Full Plant…!

By Sid Chadwick, Chadwick Consulting, Inc.

“I don’t want to be tired and exhausted from producing too much work --- at low prices --- if we ever have to close-down.” ……V.P of Sales

I continue to be amazed by several --- ongoing observations:

Observations1. Companies generally don’t track their “Estimating Hit-Ratios” --- for indicating what work they “overprice”, and what work they “under-price”.

2. Companies don’t track and analyze their “commission bonuses--- paid to Sales Reps --- for selling “above company target pricing”.

3. Companies don’t track which customers, and which “combination of Products and Service” --- generate better than average margins --- for directing where they might consider going --- for future work.

4. Companies don’t track what Services and Products --- customers ask for --- that they don’t provide (e.g., proofreading).

5. Companies don’t track what Services and Products (and combinations of those Products and Services) are increasing, or decreasing --- and then asking, “Why is that occurring?

We recently discussed with a client how he might go about constructively --- raising his prices --- about 15% --- without losing any meaningful customers. Why?

Because he had begun crunching numbers related to those questions, and came to several embarrassing --- and startling --- conclusions… as his revenues kept growing, his Sales Reps pay kept incrementally increasing, and his profit margins --- were simultaneously headed into the ground.

Measuring Charting PerformanceWhat are you measuring --- that gives you some indication of what you should be changing ….and improving?

Shouldn’t every department…. have…. “Continuous Improvement Objectives” …..?

What should you be measuring, that you are not measuring, and asking, Why is that occurring?

"What could you improve, that if you did --- would improve so many other cost, revenue, and margin variables?"

“A hunch is creativity…. trying to tell you something.” ……..Frank Capra

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