Avoid the Dreaded “VPR”

Nearly every business, in any industry, would like to increase their net income.  With the pressures of today’s economy with gas and fuel prices rising daily, healthcare costs shooting out of sight, steel prices bouncing crazily, and a myriad of other factors that are out of the control of your company’s ownership, how can you aggressively work to keep your business profitable?  One main focus of any business should be to avoid the “VPR”!

What is a VPR?  It is the acronym that we at Evans & Associates use for Voluntary Profit Reduction.  Any cost that you incur that your customer does not consider as adding value that could be eliminated…should be eliminated!  If your company is losing money (or not making as much as it could or should be making) while you maintain these unnecessary costs, you are entirely to blame for voluntarily reducing profits.

Some examples:

• Maintaining a grandiose, costly facility, but your customers never visit.
• Maintaining a fleet of luxury vehicles for sales staff that, at best, gives your customers an illusion that your company and staff are making a fortune at their expense.
• Outsourcing routine duties such as payroll processing, while your accounting staff has available time already.
• Avoiding consolidation of duties between departments due to turf battles between department heads.
• Retaining additional staff in hopes that business “bounces back”, even though there is no plan to manage such a rebound.
• Allowing lax internal controls that have the potential for siphoning resources from the company.
• Approving capital expenditures with the premise that labor costs would be reduced, but follow-up is nonexistent or too weak to enforce payback.

This list, of course, is virtually endless but the thought process is always the same.  If your company is losing money, and you’re voluntarily throwing away money through neglect or otherwise, you have two points to remember:

1. Do NOT be complaining that your company is losing money, since it’s effectively your own fault.
2. You have a great list of action items to get your company headed back toward profitability without impacting your customers

Whether your company calls this waste, non-value added, muda, or any other of many terms that say “bad stuff is happening”, remember:  “The only good VPR is a dead VPR!”