Planning for profit

Citation

(2000), "Planning for profit", Anti-Corrosion Methods and Materials, Vol. 47 No. 6. https://doi.org/10.1108/acmm.2000.12847fab.002

Planning for profit

Planning for profit

Keywords Plimsoll, Metal treatments

Plimsoll recently published a report which will be of interest to companies engaged in metal treatments. The report suggests that these companies are not paying enough attention to the bottom line. Yet every one of the 350 companies included in the new How to Plan for Profit: Metal Treatments Edition could deliver more profit. This latest publication identifies three business plans predicting what could be achieved and allocates one to 350 companies in the industry.

The three business plans

1. 1.

   Consolidation plan for the 21 per cent of companies losing money.

2. 2.

   Tweak plan for the 46 per cent of companies to maximise current performance.

3. 3.

   Expansion plan for the 33 per cent of companies in a strong position.

The Consolidation Plan

A total of 73 companies are reported to be loss making and costs are too high for sales. These companies, the report suggests, need to lower costs immediately in order to downsize in the short term to build for a future. The Consolidation Plan proposes losing 10 per cent of their market for one year and opts to reduce costs and overheads to give a return to profitability.

The Tweak Plan

According to the report 160 companies need to maximise their current performance. These companies need to refine before moving on to give a better return on capital and a leaner looking balance-sheet. The Tweak Plan takes a zero growth approach in order to maximise profits.

The Expansion Plan

A total of 117 companies need to expand on their winning formula. These companies are thought to be winning at the moment, yet the report believes that they need to exploit this winning position. An Expansion Plan was produced to explore how these companies might keep this winning formula and grow. Plimsoll suggests the plan begins with a 10 per cent growth in sales.

The Consolidation Plan

Putting this theory to the test, Plimsoll informs us that it brought every one of the 73 loss-making companies with this plan into profit from a pre-tax loss of 5.6 per cent to a pre-tax profit of 6.1 per cent on average. This was not without casualties as jobs and overheads were trimmed significantly. Plimsoll considers that what is vital to such companies' survival is an achievement of more profit from the same assets. Sales per employee figures crucially increased from £62,000 to £68,000 per employee on average with this plan.

The Tweak Plan

The implications for many are said to be slight, yet significant, if these 160 companies are to build a solid foundation from which to expand. For some, this requires reducing loans and interest payments, thereby retaining more profit in the company for future investment. On average, this tweak reportedly lifted pre-tax margins from a reasonable 3 per cent to a much healthier 6.2 per cent. Sales per employee also increased from £68,000 to £75,000 per employee on average with this plan.

The Expansion Plan

The potential for extra profit on the 117 companies is thought to be massive in this plan even allowing for rising assets and reductions in cash. Arguably many of these companies' sales are capable of growing at a faster rate than the 10 per cent suggested.

Many must consider acquisition if they are to move quickly and not lose out.

The report defines the challenge facing companies in the metal treatment market as taking a look at how your competition might behave in the future and what options they might have. Can you or they share in the additional £1.0 billion profit created in this future metal treatments industry?

To find out more about this report call Jennifer Ovington on +44 (0) 1642 257800. Our readers are also offered a 5 per cent discount when mentioning this article on ordering.