Volume is Vanity - Profits are Sanity by Ruth King This statement was made a few years ago by a presenter at a HARDI conference that I attended. It has stuck with me ever since. The statement is appropriate for this discussion on improving productivity. One of your goals this year might be to keep the same level of sales and increase profitability by 5%. Increasing your bottom line will take work. It is much easier to increase sales...the simplest way is to just raise prices. What if an increase in sales is justified? Insurance rates have risen, your employees want raises, gasoline prices are out of sight. These do justify increases in selling prices. However, a new competitor is in your market with lower prices...and they are backed up by years of experience in other markets and a cash war chest. In other words, they are buying their customer base and have targeted your customers. Yes, they will increase their  prices once their base has been established. However, this won't happen for at least two years. What do you do? First, you have to sell your company's services. Remind your Customers that you get what you pay for and that to provide the Quality service that is expected, extremely low prices are not justified. They have to make it up somewhere. Second, look at increasing productivity for the same level of Sales. This means that even though you have experienced increasing salaries, gasoline prices, insurance, etc. you do not have the option of increasing prices. You must increase productivity. For those of you who have the luxury of prices and productivity increases, your bottom line should look wonderful at the end of this year. Over the next few weeks I will discuss some ideas on increasing productivity...because I know that you know how to increase prices! Here are the places to start: 1. Ask your employees. They know where the waste is. Ask them in terms they can relate to. For example, if you ask, "How can we increase productivity by $10,000?" they will probably give you a blank stare or say "I don't know." They will probably have some ideas if you ask, "How can we reduce expenses by $100 per month?" This is a number they can relate to. Implement their ideas whenever feasible. This does two things. First - it improves your bottom line. Second - it makes the employee feel good because you implemented his or her suggestions. That person will likely contribute other ideas. 2. Look at your purchasing procedures. Make sure that your purchase orders are properly utilized and that you are keeping inventory purchases to a minimum. Remember that inventory is a bet. Your bets should be small and prudent. To contact Ruth King call 800-511-6844 or send an email to ruthking@hvacchannel.tv This article is reprinted with permission from the Feb. 26, 2006 issue of Contractor Cents.