OPERATING OPPORTUNITIES

WALLY LYNCH Paid Associates PO. Box 741623 Dallas. Tx.75243

THE year isn't over. but it's fairly I easy to characterize its business atmosphere. Sales were sluggish and profits were marginal. Costs were up. Payroll taxes, insurance and interest rates all rose.

Amidst this, our economy continues to be over populated with retail outlets. Our industry is no exception. Going into the new year one has to conclude that individually there's not much anyone could have done to change these extraneous profit shrinkers.

Since the information was first collected, the average lumber and building rnaterial dealer has spent about 980 to make 20 in pre-tax profit. There are, however, lots of exceptions to this by people concentrating their efforts into areas where they can effect beneficial change to the bottom line.

There are dealers turning inventory 10 to 12 times annually. Some dealers average $2,000,000 per truck in delivered sales. At companies where the clocks are read consistently, forklifts are working more than 35 hours weekly. The difference is in asset and manpower use.

Ask yourself where your company fits? lfyou don't own a book on inventory control, buy one and use it. Then, with what's left of the year, ask your controller to give you ownership costs on every truck and forklift you have: maintenance, insurance, interest, license and taxes and depreciation.

Trucks will be somewhere between $8.000 and $10.000 each. Forklifts will be around $5,000.

Next determine your total delivered sales annually and divide by the number oftrucks you have. How does your average compare with $2,000,000?

Now try to determine the weekly use in hours of each of your forklifts. How does each compare with 35 hours weekly?

What you're looking for in each of these exercises is your position in relation to what's being done by your peers. Let's say that your trucks average $800,000 each. What if you were just 750h as effective in asset utilization and you got $1,500,000 per truck? Ifit were school, surely you could get a "C" in trucking.

The same lollows for forklifts. If you get 20 hours per week each, could you get 26 hours, or l50lt of what's being done by others?

The exercise, where we've done it for and with people, has most often resulted in a reduction in equipment and subsequently in payroll.

lf it results in one less truck and one less forklift, it will have this result. Nominally, ownership costs for a truck ($9,000) and for a forklift ($5,000) reduce equipment expense $14,000. If your pre-tax profit is 20/0, that savings is like $700,000 in sales. If you add $10,000 per operator to expense reduction, that additional $20,000 is like $1,000,000 in sales. Who couldn't use this any year?

Sales of $1,700,000 is a larger volume than many dealers ever achieve. Even half of this is worth going after.

Look to yourself for a better year in 1990. Ifyou need help taking this one to the bankcall me at (214) 690-6600.

Tips on safe software buying

Outline specific functions and tasks that the software needs to perform to meet your needs. Allow for future growth and changes.

Talk to software dealers for information. Consult industry trade journals for evaluations and recom men dation s.

Have a dealer demo several packages. Be sure it does what you need. Use the package yourself, dealers make things look too easy. Easy is crucial for training. though, and saving money. Don't buy hastily. Try more than one at different dealers. Find a well known package, one that's widely understood. Literature and support will be abundant. Initial bugs will be corrected. Is the package compatible with your hardware. i.e., is your printer supported? Do you have enough memory? Does it require a hard drive? Will it work with a black & white monitor?

Once you have found what you want, shop around. Software prices vary considerably. Consider mail order. Some deliver next day.

If the package is to manage important data, back up your files regularly. Tape backup systems are inexpensive and pay for themselves. Computers are not lailsafe, nor are people.