Presentation Book Rev 10 13 09
- 1. Working together to find extra profit Michael Salih
- 2. Questions for Today’s Meeting Who is Expense Reduction Analysts (ERA)? How can we help you? Which cost categories would produce the best results? How does the ERA process work? Is there an opportunity to work together? Where do we go from here?
- 3. How can we help you? What are your top initiatives this year? What seem to be the obstacles to achieving them? What metrics measure success or failure? How will achieving them impact your business? What do you need to achieve them? How might savings from your non-core cost categories help you achieve your initiatives?
- 4. Logistics Small Package Freight Domestic Freight International Freight Insurance General/Worker’s Comp Health Services Equipment Maintenance Janitorial Services Payroll Processing Printing Records Management Temporary Labor Uniforms Waste Management Expense Category Opportunities Supplies Chemical Cleaning Food Services Lab and Medical MRO/Factory Consumables Packaging and Shipping Printing Stationery and Office Telecommunications Data Mobile Voice Merchant Card Fees Leasing
- 7. Our fees are half of the actual savings for 24 months following project implementation For example, on a $300,000 annual spend with 20% savings achieved, the fees would be calculated as follows:
- 8. Alternative Approaches to Higher Profits 20% cost reduction or 40% increase in sales revenue both yield a 40% increase in Net Profit Column1 Current 20% Cost Reduction Increase Sales Revenue $ 100 $ 100 $ 140 Direct operating costs $ 35 $ 35 $ 49 Labor costs $ 35 $ 35 $ 49 Non-core indirect costs $ 20 $ 16 $ 28 Net profit $ 10 $ 14 $ 14
- 9. Working together to find hidden profit No savings = No fee Expense Reduction Analysts Our clients Analyze the client’s current costs and service environment Identify and help implement hard-dollar savings options for our clients utilizing our: proprietary process; expert resources; and benchmark pricing data; Provide post-implementation support services throughout the review period Operate with integrity and respect for our client’s personnel and supplier relationships Allow ERA the opportunity to present a successful recommendation and earn a share of the savings during the review period; Provide timely access to information; Have sole right to select which of the successful recommendations is the best fit for themselves; Implement within 30 days of presentation if ERA delivers at least one successful recommendation; Do not solicit any offers from suppliers or duplicate ERA’s work, and refer all unsolicited inquiries or offers from suppliers to ERA. A successful recommendation is: A lower cost solution from an incumbent supplier(s); and/or A lower cost solution with savings above an agreed to minimum, from a non-incumbent supplier who provides equal or greater products/service/quality; and/or A solution from a non-incumbent supplier that our client elects to implement even though it does not meet the criteria above; and/or Provides savings realized from approved changes in methodologies or process
- 10. Next Steps Select initial categories for review (gather G/L data) Schedule Stakeholder meeting Sign the Client Engagement letter Find extra profit for your business Implement and measure savings for 24 month term Use savings to achieve company’s objectives
- 11. Common Concerns and Comments How much of my time, and my staff’s time, is this going to take? If we worked with you, would we have to switch vendors? What is your relationship with the Suppliers you recommend? Will you help us with cost savings projects we have underway? Can I stop the project at anytime? Who monitors the Supplier’s performance against contract terms?
- 12. No savings, no fee “ You guys have done what I’ve been trying to do for three years, but couldn’t. Either I didn’t have the time, or the energy, or the expertise.” Senior Vice President/ General Manager, Gleason Industries
Editor's Notes
- #9: This table highlights the profit-making possibilities of reducing your non-core indirect cost by 20%. While every dollar saved is equivalent to a new dollar of profit, additional dollars of income are not. Applicable expenses must be deducted from the sales dollar to determine the remaining profit. To have the same effect on your firm’s business value, you would have to increase your sales by 40% The January 19, 2009 issue of fortune Magazine has an article entitled “How to Manage Your Business in a Recession” which sites McKinsey Research saying that they have found that in a typical S&P 1500 company, a price cut of 5% would have to generate increased sales volume of 19% in order to pay for itself – and that almost never happens.