BOTTOM LINE RETURN The critical path analysis and subsequent changes in production systems and procedures reduced production time on a typical sunroom from 180 days to 90. Production time on window replacement jobs has also been reduced 50%, to 30 days between signing and installation.
Henley says these gains were essential to the financial model he sought to establish. Overhead costs accumulate every month, whether you bring in $100 or $100,000 for that month, he explains. “If you can squeeze that [production] time line down and get more product installed in a shorter time,” all that overhead drops as a percentage of sales, he points out.
With a production cycle of 120 days, overhead is approximately 33% of annual sales. Shorten that cycle to 90 days, and you’re “turning your dollars four times instead of three. Overhead is then 25% of sales instead of 33% and I’ve increased my net profit by 8% without having to spend another dollar,” Henley says.
DEAD FILE BROUGHT TO LIFE Getting production right was the first step. “You have to start with the foundation; what it’s going to take to build the product,” he says. With that accomplished, Henley applied the same analytic approach to sales, marketing, and administration.
He measures sales performance with metrics such as NSLI (net sales per lead issued) average and closing average. At the same time, he has changed the sales approach to be more assertive and more consultative.
Says Daniel Marshall, a design consultant who has been with the company for about 18 months, “I like things a lot better now because I’m not just an order-taker. I can work with people to give them the design they want. I’m with the customer from the start until the job is done.”
Similarly, Henley carefully tracks the performance of his lead sources, advertising, and promotion offers to continually refine the marketing effort. Recent attempts to work the company’s list of 5,000-plus previous customers has already produced two or three appointments a week from what otherwise would have been a “dead file,” he says.
EMPLOYEES DRIVE THE MACHINE Throughout all this analysis and wholesale change, Henley has remained mindful that while systems keep a business on track, employees drive the machine. “We run on systems, but you can’t discount the need for good people,” he says. He has instituted one or more bonus opportunities for every employee, from the office manager to production managers and salespeople, to provide a “personal carrot that keeps the focus on what is important to me, as the owner of the company.”
About half the employees remain from before Henley acquired the company. “We raised the level of expectation to the point where certain people became uncomfortable knowing they couldn’t meet the expectations set, so they eventually sought other jobs,” Henley says. Those who remain experience a more efficient and satisfying work environment. Henley and his managers “cleaned up the mess in the back,” Marshall says. “We started to believe in the back of the house again.”
A little more than a year into this extreme makeover, the results are good. Employee morale is much improved and the entire team pulls together, Marshall says. Production has been streamlined. Sales are climbing in a market that has been noticeably slower since spring. And plans are under way to expand the company’s product offering, with basements, decks, and siding now generating about 15% of sales.
“Last year the company did about $2.7 million. We should end 2007 around $3 million to $3.1 million,” Henley predicts.
But all these changes, he says, are just a beginning. “We’re constantly looking at our critical path, asking what is keeping us from moving these jobs faster and more efficiently. It’s never a finished picture.”
—Jay Holtzman is a freelance writer in Jamestown, R.I.