Lessons learned from agile businessmen who acquire weak businesses and recover

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One popular reality program by CNBC "The Profit"Marcus Lemonis, a businessman who appears in business, is showing off the process of acquiring small and medium-sized businesses that failed in business at each episode and completely recovering from the crushed state with his own skill. Lessons learned by watching Mr. Lemonis's "The Profit"Marginal REVOLUTIONIt is summarized.

Lessons from "The Profit" - Marginal REVOLUTION
http://marginalrevolution.com/marginalrevolution/2018/04/lessons-from-the-profit.html


Perfect competitionWith the concept of commodity prices equal to the average cost, the enterprise will develop business efficiently at the lowest cost. However, Chad Siberson, a professor of economics at the University of Chicago Booth School of Business, announcedpaperAccording to a typical American industry, a company with a 90th percentile in productivity distribution seems to be able to do about twice the output (production) with the same input (effort) as the remaining 10th percentile company. Of course it is not easy to measure 'work' or 'production' in a business of a company, but it is not easy to measure 'enter' (labor) and 'output (production)' in companies producing homogeneous products, Even companies that are easy to measure, it seems that there are most cases that there is a big difference in productivity.

In other words, things like a perfect competition model can not be made in the real world. And that imperfection can be a cushion for inefficient companies, Marginal REVOLUTION. This is because, even if the production cost becomes unnecessarily high, it is possible to raise the selling price more than that cost, so even if it is an inefficient company to earn revenue commensurate with effort It is because it is possible.

byJosh Calabrese

A typical company appearing in "The Profit" seems to have a further cost despite having a decent income of several million dollars (hundreds of millions of yen). In many cases, products handled by companies appearing in "The Profit" have a competitive advantage, but there are many cases that products are profitable without paying much attention to the cost . Therefore, when rival products begin to appear in the market, the profit margin will decline. And companies raise funds from banks and cover losses, but the loan will be increasing more and more.

The reason why such an inefficient enterprise can survive for many years is that the sales of enterprises will increase or decrease like the flow of tides and sometimes achieve profits beyond the target. There are certainly inefficient companies that will collapse over the years without noticing that they are falling into a crisis situation.

byHeadway

The second lesson learned from "The Profit" is that it is important to make management items systematic and easy to reproduce.

One of the first things Mr. Lemonis is doing in almost every episode of "The Profit" is to calculate whether the right item is being sold and "calculate the item with the highest cost margin". We will concentrate our company on the production of products with the highest cost margin and truncate other products. Although it is a very simple measure, many companies are saying that this is not done.

And another, Episode, Mr. Lemonis will clean the interior. Clean up the factory floor, dispose of unsold inventory, and adjust the floor to improve process flow. It has an endeavor to concentrate on the production of necessary goods, making production easier and more efficient. After that, we created an inventory management system, tracked the order contents, tracked the input (effort) necessary to create the order, and saved the cost by utilizing the scale merit when purchasing the input.

IndiaYaMexicoIt has become evident that even in the research conducted at the same time, better management will improve profit and productivity and lead to an increase in profits over the long term. In these studies, the right to "administrative intervention" is given to companies selected at random, and it is proved that improving productivity and profit by improper management has proved that "The Profit" It is said to have practiced what Lemonis is doing on field trials.

The following picture shows the state of the warehouse of a textile company in India. As far as I am concerned, the necessity of introducing inventory management system and cleaning up is clear.


In addition, the third lesson from the "The Profit" is that companies often have problems connected to personal problems in many cases. If you have a genius skill like Mr. Lemonis, such as the problems of the two brothers who the father got the company to death and the problem that the company has, what instantly becomes the root of the company's inefficiency Although it may be able to judge ?, in most cases you should not have such skills.

The connection between such individual problems and corporate problems may be a great idea in making TV dramas, but it is only unnecessary in general business. Because, in many cases, it is not possible to separate "your preference and emotional prejudice" from "business decisions".

The official site of "The Profit" is as follows.

The Profit - Home | CNBC Prime