Ideas for increasing profits

Gary Gustafson Blog 8-13Many enter the powersports industry to have fun, but we cannot stay here without making a profit. Here, in no particular order, are some best practices by category that you may find useful in making your powersports manufacturing business more profitable.

Cost of goods sold: Consider using a lower-priced off-the-shelf item for areas that your customers don’t care about customizing. Review a costed Bill Of Material item-by-item with your suppliers. If you purchase unrelated components bundled together in your supply chain for the sake of ease, the supplier might be capitalizing on your ignorance of the real costs of each item. Research taking some items out of the bundle and re-sourcing them with lower-cost suppliers — a good example is purchasing the voltage regulator and starter solenoid as part of an engine package — these items can be sourced separately.

  • Have suppliers pass on favorable currency fluctuations, but let them recoup unfavorable exchange trends.
  • Disassemble items for shipment to reduce freight costs.
  • Design weight out to reduce raw materials costs.
  • Get rid of highly controlled minerals like those of the rare earth variety.
  • Purchase non-cosmetic plastic parts in an un-dyed or “natural” color rather than dyeing them black.

Training: It’s a good idea to discuss with each employee exactly how he or she contributes to the company’s profitability. For example, designers of die-cast metal parts requiring secondary machining may not understand how their design affects cycle time, process flow or scrap rate. Dealer reps must educate dealers on how to position their products against those of competitors clearly and succinctly. Testing personnel should identify the root cause of a problem as soon as possible to prevent a late or unsuccessful product launch.

Overhead: Look into for legal document filing. A number of small businesses that I deal with use temporary office space services, which schedule offices for an hour at a time. I haven’t seen this practice cost them any sales. Another overhead consideration is websites. Small businesses can do just fine with one of the do-it-yourself web platforms. When a business reaches a certain size, a custom website sometimes must be developed, but this is a serious undertaking. Mobile is more important than desktop now, and the speed with which your site loads is very important so the site should be developed with a lean content approach. Always ask in advance what it will cost to update the website and how long updates will take to be executed. Service after the sale counts with web hosting providers.

Human Resources: Tom Tiller, the former CEO of Polaris used to say: “At the end of the day, it’s all a Human Resources problem.” Great ideas bubble up from keen-minded people and some people just have a knack for getting things done more efficiently within a given job requirement than their peers do. Employing people in non-traditional ways could reduce overhead enough to free up resources for other areas of your business. While the practice of outsourcing is often perceived as off shoring, it can be as much as 100 percent domestic. Every single supplier your company has is an example of outsourcing. Outsourcing might also involve a specialist with a home office. Outsourcing can make all of the sense in the world. I am a firm believer that success is usually about the person, not just their location.

Sales and Marketing: To paraphrase the Greek biographer Plutarch — “When Cicero speaks, the people are in awe, but when Demosthenes speaks the people march to war.” Marketing is only creative if it sells. Do you know how your customers get enthused to buy your products? These words must remain connected as a chain – get enthused … about buying … your products. Ask every customer how they got excited about your products and consider investing more in that sales and marketing approach. In my company’s research into various parts markets we find that dealer opinions are still very important to customers — so make it easy for them to recommend you. Practice the 1.5-second “magazine cover rule” with all of your communications including sales brochures and catalogs to capture the attention of sales staff and customers.

Things NOT to do to increase profits:

Don’t employ a press release service that attempts to serve all markets. Powersports is specialized and press releases dumped into cyberspace at random are a waste of money. Don’t ignore trademarks and patents as too expensive and time consuming — they are part of doing business. Don’t ignore social media or Internet discussion forums because you “don’t have time” — at least use a free app such as Mention that tracks online discussions of your company. Don’t get slow computers for your employees. Don’t be cheap, unprepared or shy at industry and consumer shows — plan and work them relentlessly and watch opportunities develop.

Powersports industry analyst and consultant Gary Gustafson is president of G-Force Consulting Inc. of Clear Lake, Minnesota. G-Force Consulting develops and connects world-class suppliers with OEMs throughout the powersports and Outdoor Power Equipment industries.


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