Josh beamed as the truck rolled up in front of the shop. “This will make me a fortune!” he cried. The large flatbed held a giant crate. It took the most enormous forklift (and that is saying a lot) Josh had to get it off the truck and inside as the sun was setting. He had a crew standing by on overtime to unpack and set up the new Speedking 9500, the latest, most high-tech tool in his plant.
“This will shave 20% off my processing time with even lower labor costs!” he told me. I had done some consulting work in the past for Josh and he wanted to show me his latest improvement project. Josh loved his work and loved technology in general. “I got a fantastic deal on it too. He said, “20% under list. I could sell it tomorrow for a profit”.
He started listing off all the features, including cloud-based storage and an AI-based control system linked to his factory setup. He set the crew to work unpacking it and came back to chat.
“I bet you will get your overtime down with this gear,” I said. “no more Saturday work either I bet. “Oh, we aren't working overtime, in fact, we are kinda slow”, he mused. “The sales guys can't seem to close business like they used to now that Bill left”. “I am sure it will pick up in the summer though.”
Josh inherited the business from his father and ran the shop coming up. He loves the process of making their product and is the first to say that he is not a sales guy. Bill had been with the company for a long time and had been their number 1 salesman. Hearing he retired was cause for concern.
“So Josh, are you going to cut hours or lay people off when this is up and running? Or go to a 4-day week?” “Heck no!" he snapped, "This is a great crew. I can’t risk losing them by cutting their hours.” He looked at me like I was some sort of criminal.
So Josh, If you can't increase your output because you have no more sales, and you are not going to cut your labor hours, how are you to make more money?
Josh fell victim to a very common mistake business owners and managers make. He was not investing in improving his choke point, or business constraint. Every business and every process has a choke point, this is the part of the business that is the limiting factor on it’s growth. If you invest anywhere else in the business, it will have no effect and any money you spend will drop to the bottom line... in the wrong way.
After he got over being a little testy about what I said, he asked me for advice. I asked some questions and applied what I already knew about the business. They had lost their best, most experienced salesperson, who was also a mentor to people coming up in the business. As this was not Josh’s area of interest, Bill was the group's de facto leader as well. Having lost Bill’s deep knowledge, as well as the leadership, the sales crew was struggling. Josh began to see that business was unlikely to “pick up in the summer” and the note on that machine started paying back the next month. Sales was the chokepoint or the business constraint, of his company.
To improve a chokepoint you need to get Visibility into the issues in the chokepoint; you need to establish and improve the Process; and you need to provide an Organization that will support your goals.
He stopped unpacking the crate right away, and it turned out to be true that he could resell the SpeedKing 9500 at a profit. He used the money to buy a CRM system for his sales team, which gave him Visibility on their performance and allowed them to make Process changes to improve their close rate. It also turned out that Bill was willing to come back on a limited schedule to help train and continue to mentor the sales team. One of Bill’s tasks was to build up one of the salespeople to eventually take over for him, building an Organization that has staying power.
Business owners, know your chokepoint at all times. Measure everything you can about your chokepoint process. Improve everything you can about that process and forget about improving anything else (for now). You can even sacrifice a non-chokepoint process to improve the chokepoint as in the end, it will pay back. Hopefully, as you improve a chokepoint it will move. This is a good thing. Just keep chasing it through your company.
Sales did come back for Josh and improved above previous levels as the sales team learned their new system and new skills. The last time I talked with Josh, he was so busy in the shop he was even considering buying a Speedking 9500….
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