Increase Your Margins by 25 percent

June 1, 2002

5 Min Read
Increase Your Margins by 25 percent

Commercial records management can yield very high margins. The yield can be maximized by implementation of an operating strategy based on four principles of improved profitability. This article discusses these principles and their net effect on operations.

The commercial records- management industry has been largely entrepreneurial from its meager beginning 50 years ago. For the most part, bright, rugged individualists dominated the industry. These first-time entrepreneurs knew they had a great idea and created an industry. Since they were independent, there was very little similarity in their operations. Each developed his own operation to fit the style of the client base and the entrepreneur himself, and many made significant fortunes. Today, much of the industry continues to operate independently without performance standards or benchmarks.

While other industries have developed widely accepted principles of operation, the commercial records industry is devoid of such standards. PRISM International and its executive director, Jim Booth, have begun collecting information and are making significant inroads, although industry members continue to be reluctant to freely share information.

Developing an Operating Strategy

American industry has developed several broadly held principles that contribute to high productivity and have proven successful over the past two or three decades. Commercial records-management operators can improve their operating income significantly by implementing these time-tested principles.

I have developed four operating principles that, if implemented, can improve the bottom line of any commercial records operation by as much as 25 percent. These principles are quite different than most center operations, and several long-time operators have argued their value. My experience is if they are implemented strategically, they will work well together. Each principle relies on one or more of the others, just like the four corner columns of a building.

Principle of Effective Use of Technology

Think of your commercial records business as a vehicle. There are four components: operating practices comprise the body; software acts as the engine; the operations manager is akin to the wheels; and the salesperson is like the driver. None of these parts operates independently of the others.

There is agreement today among the software vendors that the Internet will enable the future of commercial records-management software. This is not a ploy thought up by the vendors to sell higher priced software but a real phenomenon. Why is this so, and how do we use technology?

Records are important to your business clients. They feel secure when they have more direct control over their files. In the past, when companies outsourced their records storage, it caused them to give up a lot of control. The Internet allows them to regain some of that control. They can access their index information at the box, file or document level, order using a familiar shopping-cart method, and create unique indices at their own desktop PC. They like this; it gives them comfort.

The effect this principle has on your operation is reduced reliance on customer-service personnel, improved performance to your client, and outsourcing of much of the work to the client.

Principle of Strategic Outsourcing

My favorite example of this principle is 100 percent outsourcing of the courier function. There are four components of the courier function: new-client initial pickup, regular delivery, emergency delivery and scheduled pickups. Each are outsourced and managed separately, and each must be benchmarked and measured daily.

An implicit fact of outsourcing anything is you can get the results you want--but you must manage the outsourcer to the standards you have set. Management implies you must be able to measure the activities. An outsourced courier will look no different than your own employee if you set the rules, standards of performance and measurement criteria. In today's world, you are hard pressed to make any money by having your own, in-house courier service. You always have too many or too few resources, since daily and weekly activity vary greatly. By outsourcing your courier needs, you get just what you need every day.

Outsourcing doesn't stop with couriers. I have identified more than 75 percent of the activities that may be outsourced. I am working toward the "Virtual Records Center Model," where 100 percent of the operation, including marketing, is outsourced with a residual profit.

Principle of Batch Processing

Suffice it to say, doing one activity over and over again is more costly than doing the activity in batches at the appropriate time of the day or week. I recommend set activity cycles--do only what you can do when it is efficient to do it. Since commercial records management is labor-intensive, the goal is to reduce labor by scheduling activities at the "right" time.

This principle takes discipline on the part of the operations manager. It is important to have hard and fast rules concerning your work cycle and task-processing activity. When used correctly, this principle keeps headcount to a minimum.

Principle of Labor Abatement

To operate a profitable records-center operation, you must strategically reduce your manpower requirement. This is done through technology, outsourcing and batch processing. The two essential jobs in your center operation are the operations manager and the salesperson. These two positions are essential to the implementation of the other three principles and are extremely important to the success of your operation. Wise owners choose these staff members carefully. My next two columns will address how to source and select these key positions.

Regular columnist Cary McGovern, CRM, is the principal of FileMan and FIRMS (FileMan Internet Records Management Services), which offer full-service records-management assistance for commercial records-storage start-ups in self-storage operations. For assistance in feasibility determination, operational implementation or marketing support, or for questions on the FIRMS Sales Manager, call 877.FILEMAN, e-mail [email protected];

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