Adjusting your employee count can have the most dramatic effect on your ability to save money from month to month as sales fluctuate.
By Marty McGhie
One challenge all shops face is the constant need to manage the cyclical nature of sales. In today’s economy, all of us regularly deal with months that are very busy followed by months that are much less so. And to make matters worse, a very high sales month sometimes will be immediately followed by a low one.
While one solution to this peak-and-valley problem is to determine a way to “even out” cyclical sales, that can prove a very daunting task. Instead, you might want to take a look at managing the ups and downs of your sales volume from the cost side of your business equation.
First, though, it’s critical to develop an accurate measurement of your sales fluctuations from month to month and year to year. This doesn’t have to be a highly sophisticated process. Just go back over the past three to five years and graph out your monthly sales so the patterns of your business cycles are quickly visible.
Next, evaluate some of the primary reasons why one month is higher or lower than another. Once you determine some of the cause-and-effect relationships to your monthly sales volumes, planning will become much more effective – and your forecasting will provide the accuracy that’s needed for planning.
As you strive to match your changing sales volumes with your production resources, you’ll likely discover some areas of focus that can really help your business. For example, controlling your inventory levels can significantly improve your cash flow. Knowing in advance when sales are going to be low will then allow you to adjust your inventory levels in advance to reflect the sales volumes. Conversely, as you approach the busy months, you’ll be able to make sure your inventory levels are sufficient to meet the demands and avoid production issues.
Your most significant area of cost control, however, will be in the management of your labor force. Right-sizing your employee count can have the most dramatic effect on your ability to save money from month to month as your sales fluctuate.