Wednesday, April 11, 2018

Looking Within While Looking Without


About 3 years ago I took a sabbatical from Cobalt Group to be the Executive Director for a park and recreation district that employed about 60 full and part time staff. It was a fantastic job and a great experience.

When I started I discovered that the district had been running at a loss for the previous six years. Even though the district was supported by an operations and maintenance tax levy (about 58% of total revenue), I knew that I had to treat it like a business and start making it profitable. My first approach was to start looking within and control the controllable. In my experience, the easiest thing to control is the expense side of the P&L. The harder thing to do is be looking without because revenue is harder to control than expenses because, while no business can make customers come in, they can have more control over their operating costs. So I began looking at what the expenses were and where savings could be made.

The first thing I did was to determine what the cost of operating the district was. This had not apparently been done before but I figured out what it cost to open the doors every day. From there I looked at all the items on the expense side of the P&L and began working with my senior staff to understand what those expenses were and what they really needed to be. We looked at labor costs, vendor contracts, regulatory expenses, maintenance, utilities, cost of goods sold, and every other expense category to get an idea of where we could shave those costs.

Some tough decisions were made but I made sure that my staff understood what we were doing and why we were doing it. They knew their departments better than I did and by making them part of the process they now had ownership in the outcome. We met frequently to see how costs were tracking, and made adjustments where we felt it was warranted.

The staff performed wonderfully and at the end of my first full fiscal year, with only one fee increase made to only one program, we ended up with slightly over $20K in profit. This was the first profitable year the district had achieved in six years. We kept up the cost controls and at the end of my second full fiscal year we had a profit slightly over $50K. This occurred because my entire staff understood what we were trying to do, they were invested in the outcome, and they worked diligently to make it happen.

Getting back to profitability provided many lessons learned that I will share in future blogs. But going back to the basics was key. For any business, if you want a better chance at increasing your margin, start where you can have the most control – expenses. But don’t neglect the revenue side of the equation either. Start Looking Within While Looking Without.

The Cobalt Group can help you with this. Ask us how.

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