Design for Innovation
 
 

INCREASING PROFITS

04 May 2016 - TIM HAWK

Raise your hand if you would like to make more money for you and/or your employees. I’ll wait. I thought so. We all would like to make more money. Not because we are greedy or selfish, remember, we can always be philanthropic with our wealth. We all want to make more money to have greater freedom, a larger impact, or an easier path to succeed. In today’s competitive market, it seems like the income side is always being squeezed while the expense side of our business is growing. If you read well, you have figured out that the combination of reduced income and increasing expenses adds up to less profit. And, we can’t sustain any organization without income. So, what to do? How can we reduce our expenses? Let’s consider the options.

When we look at the various types of expenses that we incur each month, you can generally break the costs down into categories. First and foremost, you have wages or salaries. There doesn’t seem to be a way to reduce salaries and still attract top talent. Reducing this cost, which is often more than fifty percent of the overall expenses for an organization, is a nonstarter. What is next? Well, one of the next large expense is often software costs. Especially today, when we have all been forced into a subscription-based platform where you are guaranteed costs each and every month. I know that for our firm, we expend around 10% of our monthly allocation on software to Adobe, Microsoft, SketchUp, Autodesk, Harvest, AIA Contract Documents, and ARCOM. Yea. We pay a lot of money for software, but I can guarantee that if we didn’t have this software, we couldn’t practice architecture. So, there is that. We can’t do without our software costs, and we have done everything that we can to reduce our costs. I am sure that the same is true for most organizations. We need software to live today. It is oxygen.

Another significant cost for any organization is their lease or mortgage. Real estate is not cheap by a long shot. There is a very simple method to reduce one’s real estate cost. Reduce the size of your space. When we use less space, we pay less. Straightforward and easy. Well, how do we harness technology to reduce the amount of square footage we rent? First, we need to harness technology to allow our employees to be more efficient and effective. When this step has been fully implemented, your organization will need fewer employees. Few employees translate into fewer workstations and a commiserate reduction in square footage. Of course, it is hard to determine the direct correlation between an investment in technology, the reduction in demand for employees, and a smaller real estate footprint, but if logic applies, one should be able to make the leap.

Technology can also allow employees who work at remote locations to connect quickly and efficiently without the expense of travel. Imagine if your Los Angeles office can connect with your Kansas City headquarters through a teleconference instantaneously. Let’s compare. For example, let’s consider a $25,000 investment in video conferencing technology. How long does it take for that investment to be recouped by a reduction in travel? OK. So, the video conferencing device allows two individuals in Los Angeles to connect and not travel weekly. A flight from Los Angeles to Kansas City is roughly $400 round trip. Given the nature of the work, we may have to include an overnight stay and a per diem allocation. Let’s throw in $200 for a hotel and $100 for food. We are now at $700 per person. That equates to $1400 for one trip. For the sake of argument, let’s not even consider the lack of billable time associated with traveling. Anyway, it would take just about eighteen (18) trips to retire the initial investment. Of course there will be some travel required, but it seems clear that the initial investment in embedded technology will drive profitability in any organization.

Come on, guys. Allow us to incorporate technology into your workplace and watch your profitability grow on the other side.