I’ve been working with several specialty manufacturers recently. All of them have been in different parts of the specialty-manufacturing world. We’ve found some common strategies that have helped them improve the enterprise value of their companies.
Focusing on one of the four issues below can help improve the value of your company. Here are some things you should think about concentrating on if you’re in the specialty manufacturing business:
Know what your niche is. Success in specialty manufacturing is all about niche development. I suggest that you develop a niche that is about ten times the size you would like to develop. This means that if you want to develop a $5,000,000 line of business you want to find a niche that has about 50 MM in sales.
You will likely find that as you develop the niche, you’ll be able to find ways of dominating the niche and develop not 5MM in sales, but closer to 10MM in sales. Your goal is to find ways to become a specialist in small sub-niches where the customers know you’re the go to company for them to work with.
Have your own brand of lean manufacturing. Specialty manufacturers of all sizes are learning about what lean manufacturing is. Many companies in this space are struggling with how to become lean.
I’m finding the companies we’re working with have decided to chunk down their lean projects. This means that when they decided to do a lean installation in their company they decided to work on one or two parts of lean at a time.
Specialty manufacturers that do less than $100MM in sales just don’t have enough resources to do a full on lean installation at once. Starting with the part of lean that will give you the best results with the least amount of effort always makes sense.
Design one or two KPI’s (key performance indicators) with everyone having a driving number. Just like lean implementations being too big, many companies are tracking and trying to manage too many KPI’s. The companies we’re working with have made the decision to have one financial KPI and one non-financial KPI that is tracked by everyone in the company.
We’ve helped the companies we’re working with recognize what they can do to help the company move forward with its KPI’s. This understanding comes from each person in the company having a number they can influence and concentrate on. When your employees can watch their own performance help the company’s performance numbers start to mean something to everyone.
Design a variable compensation plan that supports the KPI’s in the company. If your people help you become more successful, it just makes sense that you provide a system for them to make more money. I love the idea of guaranteeing middle of the road compensation but allowing those in your company to help themselves be paid exceptionally well.
We help our specialty manufacturing companies put together programs that not only help their employees keep an eye on the ball through KPI management, but also through the way they get paid. We know that when a variable compensation program is successfully implemented the culture of the company changes for the better.
If you’re a specialty manufacturer or an advisor to one, what are you doing to help your company become strategically excellent?
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