Rethinking Work Hard, Get Ahead to Work Less, Make More

Mark Coudray shares how business owners can transform their businesses by focusing on working less to work more.

This year marks 50 years since I started my very first business in my parents' garage with $200 USD. I was printing t-shirts, like so many who start in this business. Much has been learned since then, and I want to share some of the hard-earned lessons after hundreds of employees, millions of shirts printed, and multiple technology investments.

Well-meaning parents, teachers, and mentors advised, "If you work hard, you'll be successful." It's a popular idea, especially for those starting their own business. The thinking is,  if you work really, really hard, you'll get big rewards. They believe if you're super dedicated and work super hard, you'll be successful, earn a lot of money, and gain market recognition.

Even with this, it can feel like you're stuck or even going backwards. Being tired leads to exhaustion and that leads to disillusionment. What's happening is, as we get older and time passes, our big dreams begin to slowly disappear. This made me question if this belief we trust is actually true.

It's time to look at work ethic in a different way. I wish it was as easy as just saying "Work smarter, not harder." That's a good start, but it's not very specific. This article aims to explain the idea of "Work Less to Make More" in a clear way.

To begin, some realities of working hard. Working with hundreds of companies, there is one common theme. Growth means more top line sales. On closer examination, this is absolutely NOT true. The RIGHT kind of sales are what are needed. What does this mean?

Simply put,  jobs that keep the presses running. Not setting up jobs, not waiting for approvals, and not changing over between jobs. These three activities destroy a company’s ability to generate a profit. The only time Margin is earned for the company is when the press is printing. Margin =  (Sales-Cost of Goods Sold), and is what pays the direct and overhead expenses of the company.

Where most companies get in trouble is selling the wrong type of work.  It’s common to set low minimums to win work. Taking a close look at the margin earned divided by the time it took to do the job, you are in negative territory. This simply means it costs more to produce the job than you earned from it.

With this simple observation brought to light, other beliefs came under question. On closer consideration it became crystal clear not all customers are a good fit.  Further, the choice of working with a customer was often driven by the motivation of top line sales instead of margin per hour. This directly leads to “busy being busy.”

This means the company is complicating everything by engaging clients and work that consumes the most valuable, non-renewable resource you have. TIME.  Connecting the dots, the key metric to track is margin earned per hour/day/week/month. The period depends on how much effort is invested in tracking systems. The better the system, the finer the time period. Strive to track margin/hour on each and every job.  This will be somewhat discouraging at first. The good news is, correction happens very quickly.

My own experience in my operation bears this out. I had been in business for 23 years before I realized what was going on. I was following the traditional Standard Cost Accounting practice I had been taught while at University.  We were competitively priced and busy all the time. Our typical monthly Net Operating Profit fluctuated between 2% - 6% depending on how many jobs we ran in a month and how long each job ran. That was OK but clearly not enough to grow.

Within 60 Days of monitoring Margin/hr, our Net Operating Profit jumped to over 25%. This was stunning and shocking to the point of disbelief. It was a completely unexpected result.
The single change was to schedule jobs with the highest margin/hr first. This caused our Breakeven to drop from Day 19.5 to Day 16. The impact was stunning.  It meant we were no longer earning profit in the last 1.5 days in the month, but the last 4 days per month.

Even more important that 100% of the Gross Margin on every job after Day 16  was pure Net Operating Profit. We calculated our cost as TOTAL COST meaning everything we had to pay for during the month.

This experience opened the door for further review and analysis. This was done using traditional Pareto Analysis. Also known as the 80/20 Principle, it asserts  80% of the results come from 20% of the inputs.  In this case 80% of Gross Margin/hr comes from 20% of the customers. Is this really true?

To test this, it’s necessary to track Margin/hr for at least a month and preferably 3 months.  With this information available, it does follow the principle. What conclusions can be drawn from this new information, especially as it relates to customer behavior?

Immediately, it became obvious the WORST performing jobs and customers were new accounts. This happened for reasons requiring additional time needed for:

1. Art and press approvals,

2. The client to learn and follow shop systems,

3. Counting and verification on delivery,

4. Inspection & possible correction of delivered work,

5. Goods procurement if not standard to shop practice,

6. Increased communication with the client,

7. Clarification of decision-making contacts,

8.  “Committee” approvals,

9. Customer Volunteer contact education.

Besides these time sucking factors, there was increased pressure to price jobs low in order to win the work. This came right off the margin available to cover all the other costs. 

To make matters worse. This price-driven sensitivity was directly responsible for much higher customer churn as these price-shoppers would switch to new vendors for a lower bid.

Of more than 400 companies reviewed, the lower 75% of customers accounted for only 7%-11% of top line sales, and an even lower percentage of margin/hour per job. One company with $3 million USD annual sales realized this and stopped doing business with their lower 50% of customers. They experienced an INCREASE in Net Operating Profit of $58,000 USD by NOT doing business with them. 

This resulted in much more time to increase the level of service with their best customers. It had the added benefit of reducing their labor spend as well.  They were able to cut their labor requirement and completely eliminate scheduled overtime.

This is just one example of the need to question the beliefs being used to run a company. The world is in a tremendous shift from analog to digital.  This has been going on in our industry since about 1984 with Desktop Publishing, but gained full velocity in the early 2000’s.

The challenge with these foundational beliefs it they evolved in an analog world where factories were geared for mass production.  There were very few set-ups and change-overs. Jobs would often run for days or even weeks.  I remember one major national program we printed that was on press of almost 3 months. The only downtime was for screen failure.

The digital economy is exactly the opposite. It is focused on mass customization where the trend is to a unit of one.  Any company in our industry has surely noticed the smaller and smaller order sizes with faster and faster order turnaround.

The main take-a-way from this article is to question every belief decisions are made with. I use this four step process:

1. Is this True?

2. Is it Absolutely True?

3. Is it True for us?

4. What does this mean to us?

This is the first step to fundamentally transforming your business to be highly profitable and successful in the digital economy. It is also the foundation to Work Less, Make More.