How Good is Your MRU©?

Originally featured in SBAM’s FOCUS Magazine

I know you’re wondering, so let’s define MRU^© right off the bat:

Firstly, MRU^© stands for “Maximum Resource Utilization.” Loosely, it means getting “the biggest bang for your buck,” aka freeing up cash, with the hard and soft resources that you, as a business owner, have access to. Hard resources include assets such as property, machinery and tools. Soft resources include assets like money, employees and training.

A question often asked is, “How can a business owner engage in maximum resource utilization?”

Back in 2007, my son, Steve Scott (a former dairy farmer who is now a beef and crop farmer) prompted me to think of the MRU^© concept. At that time, he had a herd of over 200 cattle and an over 300-acre farm. Given the cows’ collective ability to constantly produce gallons of manure as they grazed on the farm, there was a significant supply of “enhanced soil.”

Steve described how he used his skid steer, manure spreader and dump trailer (that were often otherwise sitting idle) to collect, process and deliver the rich soil to newly acquired customers (his fellow farmers) in nearby towns.

By spending a few dollars for fuel, and using both hard and soft assets, he has been, and is, realizing a profit of 98 percent!

Accounts Receivable: if your business warrants an accrual approach to bookkeeping, then you may want to look at your operational policies concerning your cash flow.

First, take a look at how you handle receivables. Do you have a reward/penalty policy in place? If so, can it be improved in any way? If you don’t have a receivables reward/penalty policy in place, why not? Without one, chances are your customers/clients will take advantage of your leniency.

Marketing Expenses: marketing return on investment (MROI) expectations range from 2-to-1 to 10-to-1, depending on the type of campaign you are conducting. According to experts, online marketing campaigns often yield the highest ROIs (to learn more, simply google “Marketing ROI”).

To determine if you can conduct a marketing campaign that yields a higher MROI than you are currently realizing (and if you haven’t done so already), develop profiles of your primary, secondary and tertiary target customers/clients. An open-minded review of those profiles will let you know where to spend your marketing dollars. Make sure you are “fishing where the fish you want to catch are.”

Supplies Cost: are you paying the lowest possible prices for your production and administrative supplies? If not, joining a buying consortium and/or an industry association can result in substantial volume discounts that will more than offset the often comparatively minimal cost of joining the consortium and/or industry association.

Negotiation Skills: are you hesitant about “being tough” during negotiations while you do your best to get higher prices for your product or service? If you are, hire a good negotiator and pay that person well. If you want to hone your negotiation skills, take some negotiation classes online or at a nearby college. If you want to know what to watch for during negotiations, read the Harvard supplied article at www.pon.harvard.edu/daily/batna/10-hardball-tactics-in-negotiation.

When you secure the highest possible, market-tolerant prices for your product or service, the increased revenues will drop right to your bottom line and increase your amount of cash on hand.

Hidden Capabilities: Daniel Shinaver M.H.R.M., B.B.A., owner of DS Employment Services, suggests learning about your employees’ hidden knowledge and skills. He states, “Untapped Employee Knowledge Resources (UEKR) is an often overlooked or underutilized employee skill set [that] employers quite simply don’t leverage; often to their own financial detriment.”

A review of resumes could provide insights into some of those hidden skills and knowledge. And actually hearing how employees describe their non-work activities could also help.

Training: is your training yielding desired results? If not, take a look at your overall training process. Is your trainer the right person for the job? They may be knowledgeable, but are lousy trainers. Do you have a tracking process in place? Are your expectations realistic?

Take a reality-based introspective analysis of your training process and environment and then move forward with the necessary steps to correct the process. This can yield results that exceed your expectations! With a higher amount of funds available, raises and bonuses can be given, leading to a more positive work environment, which leads to greater proficiency and efficiency, which leads to more cash on hand and so on.

Financial Recordkeeping: there are numerous worthy financial software programs out there. Using one that best fits your business can make a world of difference when it comes to efficiency. If you have an accountant, seek that professional’s advice for purchasing a new program or modifying your existing program.

Numbers don’t lie. When you have the numbers you need in front of you, you are more likely to make timely, cash-advantageous decisions—a definite MRU^© activity!

The type, size and capability of hard assets will vary greatly between manufacturing firms and service firms.

Equipment Replacement: all too often, equipment is pushed beyond its useful lifespan resulting in repair costs that exceed what payments would be if new equipment was purchased. Chances are the new equipment will have lower operating costs and increased efficiencies. Performing relevant due diligence and conducting a cost/benefit analysis will make your decision about what to do easier.

Capital Equipment Maintenance Plan: if equipment is properly tended to at the proper intervals, the likelihood of having to pay emergency repair costs is greatly diminished. Having and executing such a plan can help save money and possibly come in under budget.

Airlines, hotels, virtual assistants and property restoration companies are all service firms. Thus, the size, quantity and investment in the hard assets will vary greatly.

Firm Size and Type: a solopreneur is likely to have minimal hard assets beyond administrative and service-relevant equipment. Whereas, a sizable service firm may have a greater quantity and diversity of hard assets.

With a little creative thinking and outside input, there is bound to be MRU^© applicability to currently underutilized assets. Don’t be afraid to ask for help to determine your approach.

As mentioned at the beginning of this article, the ultimate reason for optimizing the revenue-generating capability of your hard and soft assets is to have more cash on hand to do what you need to do when you need to do it.

The following scenarios offer just a few of the possible benefits of engaging in MRU^© activities. Chances are you can think of many more that fit your particular business:

Saving Money/Improving Profitability: the owner of a worthy competitor two towns over passes away and the owner’s family decides to close its doors. You know for a fact that you each sold many of the same products and the family is willing to sell the inventory for fifty cents on the dollar. The great news is that the cost of the inventory was $250,000 which means once you buy that inventory, you’re about to save $125,000!

Note: the saving occurs only if $125,000 of liquid funds are immediately available.

Fighting Unfair Competition: a competitor decides to “play dirty” and substantially lowers its prices. You decide to “fight fire with fire” and you lower your prices, as well. By doing so, a price war ensues. Unfortunately, the only group of individuals to benefit from a price war are the consumers. Because you have a wisely accumulated cash reserve, you feel well-prepared to fight the war and win.

Key Employee Retention: good employees, and particularly key employees, are tough to keep. Sooner or later the industry learns of the key employee’s proven results and general worthiness. You are now six months away from the end of the employment contract with a key employee and are considering giving that individual a sizable bonus for signing a new ten-year employment contract. Once again, you are able to pay that bonus because of your healthy balance sheet.

Now is the time to sit back in your chair and think about improving your MRU^©. What hard and soft assets do you have that can be repurposed (temporarily) in order to generate a highly profitable venture?

As you contemplate your options, think outside the box, but stay within the box. Essentially, using the assets you already have (without acquiring new assets) is staying within the box. How you use those assets differently is thinking outside the box.

Good Luck!

George Scott is the president of Business Consulting Solutions, LLC (formerly known as Business Consulting Services), a Lansing business consulting and business brokerage firm that helps business owners fix, grow or sell their businesses. An SBAM member since 2014, many of George’s business articles have previously appeared in Focus. He can be reached at
(517) 515-1701 or georgescott@businessconsultingsolutions-llc.com.