airstream bathroom remodel lake villa low budget kitchen remodel powerhrg mail 1950s kitchen remodel hoffman estates adding a front porch to a colonial house hainesville .. Chicago Drug testing

Invalid Excuses for Poor Business Results - Rising costs

Note to Northwest Airlines ? It's not about fuel costs

For the first quarter of 2005, Northwest Airlines posted a loss of $458 million. The main reason cited was high fuel costs.

Northwest complained that fuel prices surged to $630 million from $450 million for the same time period last year. Let's start by looking at some numbers. During the first quarter of 2004, Northwest lost $230 million. This means the increase in red ink was $118 million while fuel expenses increased $180 million. Obviously, with fuel expenses higher than the change in red ink, one could make an argument that higher crude is responsible. This argument does not hold up to scrutiny when you consider the entire cost of fuel was only $172 greater than the loss. Also Northwest has stated a penny fuel increase equates to $1.6 million in operating costs. A $458 million loss attributable to increased jet fuel cost would need to cost $2.86/gallon using Northwest calculations. At the end of the first quarter, jet fuel averaged $1.27 cents.

Okay, too many numbers, let's look at it a different way. Based on Northwest's total fuel bill, if fuel was the reason for the loss, the only way they could have turned a profit would have been to run their planes with only 25% of the fuel actually used. Although this would be a quick fix and return the airlines on paper, if their argument is correct, it would have had a dire effect on reaching each flight's intended destinations.

If this isn't convincing enough that Northwest's blame of fuel costs is invalid, consider Southwest Airlines. The first quarter of 2005 was the airlines 56th consecutive quarter of earnings ? earning $76 million dollars. Southwest, which has been able to compile a winning streak of 32 straight years of profits did not need to make excuses for their earning, despite fueling their planes sufficiently to reach their destinations. However, Southwest did comment on rising fuel prices when they released their earnings statement. Their comment, "While we are not immune to the challenging industry revenue environment and glut of capacity, we are well positioned for growth and will continue to explore long-term profitable market opportunities."

Blaming operational costs, including price increases from suppliers, is common among businesses. Entrepreneurs and Fortune 500 companies fall pray to this invalid excuse. Successful business professionals see increased costs in advance, and prepare for them. For example, Southwest Airlines has hedged their fuel expenses through 2009 in anticipation of higher prices. They said, "Excluding fuel, our unit costs declined 3.8 percent. This superb performance reflected a tremendous effort by our Employees, and they continue to work hard to improve productivity throughout our Company."

To create consistent earning, Southwest Airlines offsets the volatile fuel prices by buying crude oil derivative contracts to limit their risk to sharp changes in jet fuel costs. This practice makes it easier to budget for fuel. Although there is not a jet-fuel derivatives market, airlines can hedge indirectly by dealing in closely related oil futures, then use the proceeds to offset the higher fuel costs.

Rather than making excuses for higher costs, look at ways to offset those higher expenses through a team attack on budget waste. If possible, prepay or set aside money to counteract those costs when they do go up. Predictable increases should be written into proposals as early as possible.

Proper planning puts you on the path of max impact, where your business will flourish despite erratic business expenses.

Rick Weaver is President of Max Impact, a national leadership and organization development company based in Rochester Hills, Michigan. Rick is an accomplished business executive with experience in retail, market analysis, supply chain and project management, team building, and process improvement. He has worked with hundreds of companies to improve sales, processes, and bottom-line results. MaxImpact offers leadership and organizational development services along with employee assessments and background checks. Contact Rick at 248-802-6138 or via email, rick@getmaximpact.com. MaxImpact is on the web at http://www.getmaximpact.com

In The News:

Business Results - Four Critical Success Factors

Scenario OneDuring a recent presentation, a business owner was given... Read More

Are You Ready To Go International?

Although North Americans were the dominant population on the Internet,... Read More

Turning On The Lights

Fun From The StartFor those with the will to start... Read More

Why You Need a Business Planning System NOT a Business Plan

When someone mentions business planning we have been conditioned to... Read More

Designing an Efficient Distribution System

Let us look at a few of the big distribution... Read More

Attributes of Companies You Dont Want to Buy!

There are no "rules of thumb" in the pursuit of... Read More

What Every Service Provider Ought To Know About Writing A Business Plan

It's easy to lose sight of what needs to be... Read More

I Always Play by the Rules and It Stinks!

This week I coached a wonderfully lovely woman I'll call... Read More

Top Ten Traits of Strategic Thinkers

Want to become more strategic? Add these traits to your... Read More

Secrets Of Effective Brainstorming

Have you been in a "brainstorming" session where each person... Read More

Content Management: Wise Investment for Business Prosperity

The time when a website was just a simple set... Read More

The Six Sigma Method and Design of Experiments

Six Sigma is becoming a proven approach for businesses and... Read More

The Chief Cause of Business Failure & Success

Business rises and falls on leadership. According to business guru,... Read More

Innovate Today for Great Leaps Forward Tomorrow

How often does your company make a quantum leap forward?... Read More

Strategic Planning Consulting

Strategic planning and consulting is the strategy roadmap to manage... Read More

Clearing the Path: 4 Ways Fear Wreaks Havoc on Your Dream and What to Do About It

Please take a moment before you read any further and... Read More

Akron OH; A great place to do business

When looking at Akron carefully one cannot help but notice... Read More

Laying It Out On Paper

You might be thinking to yourself, "Why should I waste... Read More

Own Your Niche by Building a Niche Community

In 1997, David Steele was making the transition from a... Read More

Corporate Contingency Planning

Part 1A few weeks ago I attended a seminar sponsored... Read More

Business Process Methodologies

I've either been involved with or held a process-related role... Read More

Is Your Company Growing Fast Enough for You?

Are you frustrated by the lack of growth in your... Read More

Succession Planning: Problems Getting Started

A survey released by the American Institute of Certified Public... Read More

Mobile Franchise Business Expansion Strategy

If you own a mobile franchise business and wish to... Read More

Nine Succession Planning Mistakes Small Businesses Should Avoid

1. Attempt Succession Planning Without Other Strategic Plans. Succession plans... Read More

led lights wholesale led flood lighting fixtures Pete's produce ..
led lights wholesale led flood lighting fixtures Pete's produce ..