Let go of the unprofitable

While growing up in the country, we often heard farmers say, “I make a lot of money, but I don’t get to keep much of it.”

Revenue may look impressive, but every business needs to track profit. Many propane operations have several segments of their enterprise contributing to the bottom line. For example, not only are you in the propane business, but you could also be in the heating business, the grain drying business, the water heating business, the motor fuel business and the gas grill business. Each segment of activity needs to be examined for profitability on a regular basis. After a close examination, you may discover that one of these market segments is not profitable for you.

Author and financial expert Greg Crabtree asks, “So why do we continue to hold on to these losers? ‘For strategic reasons,’ is the excuse! Yet, what is the strategic advantage of losing lots of money over a long period of time?”

One of the contributing factors to Continental Airlines’ financial turnaround was the elimination of many of its unprofitable routes. Although these routes kept airplanes in the air and ground crews busy, they were ultimately draining the airline’s profits. After dropping some of the unprofitable routes, its financial situation began to improve substantially.

Even the unprofitable market segments in a business contain the same high labor, material and administrative costs. Trying to be everything to everybody does not work.

Not only is it possible to serve our customers fairly and at a reasonable profit, it is also vital. Steve Chandler put it best when he said, “Make your company make money.”

Ken Albrecht is president of Reliable Propane in Clarence Center, New York. He can be reached at ken@reliablepropane.com or 716-741-3000.