The 4 Top Leverage Points to Scale a Manufacturing Company

Over the past 20 years of coaching business owners I’ve enjoyed a number of business coaching clients who ran small and mid-sized manufacturing businesses. Here is my take on the four main leverage points to scale a manufacturing business.

My thinking on this was deeply influence by my friend and co-author of, Build a Business, Not a Job, Stephanie Harkness. Stephanie (also a former client) was the former Chairperson of the National Association of Manufacturers (NAM) and serial entrepreneur with numerous manufacturing successes under her belt.

Leverage Point #1: Your sales system.

For those manufacturers who rely on a sales force to sell their products (either directly to the end users of their products or through the sales channels that in turn sell their products), strengthening your sales system and upgrading your sales team is a big leverage point to scale a manufacturing company.

This includes:

• Your lead management system (to make sure all leads get identified, graded, and put into a reliable follow up process)

• Your baseline sales process (to make sure you scale your best practices on how to follow up with your leads, improve your sales scripting, and close more business.)

• Building and refining your system for finding, hiring, managing, coaching, and compensating your sales team.

• Layering in evergreen sales systems like formalized referral systems and reactivation strategies to spark past customers to buy again.

• Your formal sales management and reporting system.

Take the example of Chad Johnson, owner of a ceramic manufacturing business in California. After the loss of a major client (worth over $3 million a year of business) Chad’s company lost $2 million a year of business. He lost one of his two sales people.

While he couldn’t afford to immediately hire a new sales person, by reworking his existing comp plan (which was too base rich and not enough performance weighted) and creating a better sales system, his one sales person increased her sales by 200 percent in 90 days. (Amazing what incentives properly designed do…)

If you sell via a sales force, or could sell via this sales channel, take some time to review how you could leverage your sales and profitability by refining your sales system.

Leverage Point #2: Build an “expert system” to help you bid on more work, faster, and more accurately.

Does your company secure most of its orders through a bid, auction, reverse auction, or “RFP” (request for proposals) process?

If so, one of the key things you can do to grow is to build an expert system that helps you find, grade, and quickly, efficiently, and accurately bid on more potential contracts.

A large number of our manufacturing business coaching clients find most of their contracts through this type of process (as opposed to a dedicated sales force or other sales channels). Their struggle is that they have no scalable system to bid on the right projects at the right prices. How about your company?

Do you have a robust “expert system” that does the following:

• Gather a larger pool of potential projects and contracts to bid on.

• Efficiently process through these potential projects, and based on a clear criteria, filter out which opportunities they should (and should not) bid on.

• Tap into your company’s best intelligence to know what price and terms to offer. (Normally this is simply drawn from an expert’s head in the company. Instead we help our clients to formalize this knowledge so that most, if not all, of it can be done independent of any one team member and expert.) Accuracy is the key here as you’ll be living with the terms of the contract you bid at for months or in many cases, years to come!

• A template driven process to package your bid with the correct languaging and format to both support your sales efforts and to protect yourself in the fine print.

Start by reviewing what you already have – both on paper or digitally (e.g. spreadsheets to crunch pricing, cover letters for proposal responses, sample past project bids, etc.) and in the heads of your internal experts.

Then look for simple ways you streamline and formalize your core bid process.

Finally, use your new refined system and measure its impact. Continue to improve it over time.

Leverage Point #3: Building a successful hiring and retention system to get and keep the right people.

Most manufacture businesses struggle to find and keep the right talent.

Have you built your hiring process? Do you have a successful system for retaining your top talent? Both these are critical for successful manufacturers.

Listen to Stephanie’s advice to manufacturers:

“Too many manufacturers are afraid of hiring better, smarter, more experienced team members to lead areas of their business, as if the presence of these team members threatens to eclipse the insecure owner. I’ve always believed in hiring top people and giving them the resources and support to do a world-class job. In fact, this has been the single biggest secret that Jack and I have discovered on our journey to building an owner independent company.”

Leverage Point #4: Strengthen the financial pillar of your company.

80 percent of the manufacturers I’ve coached initially had poor financial systems and controls.

This hurt them in 3 main ways:

1. It hurt them when trying to manage cash flow. They didn’t have the predictability of income and expenses that would allow them to make better, smarter, and more timely financial and strategic decisions.

2. It hurt them when they went for financing to replace or secure new capital equipment.

3. It hurt them in their collections – which radically reduced their sustainable growth rate. Yes they eventually get paid, but their receivables can stretch out for 60-90-120 days or more, simply because they don’t have a solid system in place.

What our manufacturing clients come to learn that because their businesses tend to be so capital intensive, building on a solid financial foundation is critical to make sure their growth is sustainable and to make smarter strategic decisions.

If you enjoyed the ideas I shared, then I encourage you to download a free copy of my newest book, Build a Business, Not a Job. Click here for full details and to get your complimentary copy.

Keywords: scale a manufacturing business