24 WESTERN PALLET
Are you focused on the profitability of your company? Guy Gruenberg, a well known business management advisor and consultant as well as the chief strategic officer of Rose Pallet, recently hosted a WPA seminar, Pallets 101. He provided insights into how to use data to create new insights into pallet company operations as well as how to improve profits. The presentation also included a new interactive poll feature that allowed attendees to actively participate, and helped him understand where participants were in their journey.
He started by asking the audience if their pallet companies all had a business budget. A finished budget usually requires considerable effort, he stressed, and can be seen as a basic financial roadmap for your company for the next year. He stressed that they are really not hard to put together because typically have most of the information required such as mortgages, taxes, etc. “Your first budget may not be super accurate, but you at least have to take the ability to go ahead and get started.”
Gruenberg emphasized the importance of allocating overhead, both fixed and variable, in costing to understand the breakeven point. Examples of fixed overhead include mortgages, rent, insurance premiums, Workers Comp, and salaries. Examples of variable overhead expenses include utilities, direct labor, lumber and nails, fuel expense, and commissions.
“That’s one thing we have to focus on, never sell anything for under breakeven,” he said. Rose Pallet evaluates its customers based on how they pay their bills, how much lead time they provide, as well as other criteria. They have an “aggravation to profit quotient.
“If there's a lot of aggravation, there better be more profit in it,” he quipped. “But at some point in time, you may have to part ways with certain customers.” And if customers leave to chase better pricing elsewhere, they might not be able to help them out. They “probably taken the supply that was allocated for them and given it to somebody else.”
He encouraged pallet companies to seek professional guidance with budgeting, such as from their accountant, advisor, mentor, local college courses, or even an industry colleague met through attending a WPA meeting. One often untapped resource is your banker. “I wouldn’t hesitate if you have a good relationship with your banker,” he said.
Given the volatility of input pricing involving everything from labor and lumber to nails, Gruenberg encouraged pallet companies to review their P&L frequently rather than quarterly or annually. About 12% of attendees said they reviewed P&L weekly, and 59% did so monthly.
Pallet Profits 101: Creating Insights from Data