trucking profitability insights

Trucking Profitability Insights

Make Everyone in Your Trucking Company Responsible for Profit

Posted 6:17 PM by

Profit is a state of mind. In fact, it is the overall fuel that powers your trucking company.

The idea that the profitability of your trucking company depends solely on the owner or CEO is a traditional mindset that has become antiquated, especially in this difficult economic environment. Profit should be the responsibility of the entire management team, properly called a “profit team.” Without profits, your business opportunities are greatly restricted. However, there are many business activities that can help you achieve your profit goal.

Business and financial goals are too often nondescript and arbitrary. Financial goals should be measurable, manageable, specific, and understood by the management-profit team in order to relate them to the bot­tom line. For example, instead of setting a goal to run 2,700 miles per tractor per week, aim to utilize equipment efficiently and at an optimalrate per mile.

Oftentimes, company leadership shares the fallacy that profitability belongs only in the hands of the CEO and others should perform only the tasks in their job description. A change in mindset is necessary to accurately implement a profit philosophy. It is then important to filter that attitude down the ranks and make sure your management-profit team accepts responsibility for contributing addi­tional profitability to your company. Of course, attitudes and thought processes cannot be transformed overnight or by mandate. The
man­agement-profit team must be completely aware of the role they play in improving the organization's bottom line and should understand that the profit commitment must be developed.

Every person on your manage­ment-profit team needs to be responsible and directly accountable for the profitability of the company. Even if a salesperson meets his or her goal of selling a certain dollar of freight revenue there may be inefficiencies in the freight utilization. A salesperson’s success should be measured by how much profit was gained and not on specific sales dollar amounts.

Profit is not an unspeakable word – it is the reason that your organ­ization exists. Profits pay salaries, help you expand, and make work more enjoyable. Obvious? Not always. There is an interrelationship between your organization's profits and your managers' success. The next step is to teach your management team to redirect their thinking so that profits are a state of mind. All other tasks should support the profit goal.

To determine if your company has a profit mentality and help your managers and staff generate greater prof­itability, consider the following questions. Any “no” answers means you have room for improvement to your bottom line.

Profit Mentality Quiz

  1. Do we have a company-wide plan for profits?
  2. Are our managers held accountable for various metrics that contribute to profitability?      
  3. Do we have an inventory of untapped ideas that will add to the bottom line?                      
  4. Is our company profit-driven rather than sales-motivated?              
  5. Does our company have a policy regarding the types of customers it will serve?               
  6. Does our business take its long-term profit objectives into account in its hiring process?   
  7. Has our organization determined how the demand for our services may change based on the environment, competition, etc.?
  8. Does our business keep tabs on the competition?    
  9. Does our organization assess customer service satisfaction levels?           
  10. Does our organization methodically and periodically reevaluate its strengths, weaknesses, opportunities, and threats?      
  11. Does our business survey our management team about their business goals and objectives?       
  12. Does our company have formal profit goals and objectives?
  13. Does our management team discuss profit objectives regularly?    
  14. Have our profit goals and objectives been communicated to appropriate staff?     
  15. Is there a written profit plan in place to achieve our organization's profit objectives?
  16. Does our business periodically evaluate its profit plan accomplishments and update it?     
  17. Is there a profit culture in our organization?  
  18. Is there a commitment by our management team for improved financial performance?   
  19. Does every manager know what additional profits would be used for?       
  20. Do our employees realize that profits are their responsibility?          
  21. Are employees and managers rewarded for meeting profit objectives?       

About the Author
Tim Almack is the partner-in-charge of Katz, Sapper & Miller's Transportation Services Group. Tim audits and reviews financial statements and advises numerous trucking clients in accounting, reporting, internal controls, analysis of cash flow, and other operational matters. Connect with him on LinkedIn.


 
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