Sloman showed Post how to perform the same kind of analysis on Diamond's other operations. She was shocked to see that four of the six -- all except driver and truck deliveries -- were generating losses.
One Monday morning two months after Sloman's arrival, Post made an announcement. "I've made up my mind," she said to Sloman and her managers. "I know what I have to do."
* * *
On January 3, 1995, post shut down the bicycle-messenger business, which was killing the rest of the company. She saw plainly that it was pointless to compete with operators charging $3 per delivery when she had to charge $10 just to cover her costs. (After all, the $3 operators were smaller companies focused on bikes.) And it made no sense to try to run the bike work simultaneously with the suburban and regional vehicle work, which was profitable, each job generating an average of $27.60 in revenues to cover $21.23 in costs. "We didn't need the bike service to have the vehicle service," says Post. "I knew I couldn't delay the decision, because every second was costing us money."
Was there a way to jettison the bicycle-courier business gently without losing the profitable driver jobs that came from the same customers? Post and Briscella nervously rehearsed what they'd say in face-to-face visits. A few customers wouldn't stand for it, and Post wasn't surprised when 4 of her top 30 accounts took all their business elsewhere. But she took her lumps up front. "I wanted to be clear and direct with my client base, and I think I gained credibility that way," she says. In the end Post kept all the large accounts that used her drivers more than her bikers.
Hard as the decision to close the bicycle operation had been for Post to make, it liberated her. No part of the business was untouchable anymore, and no part of the business was unknowable.
Within a few months, Post closed two more of Diamond's unprofit centers -- airfreight and parts distribution. Using the profit-center analysis, Sloman had prepared a pro forma income statement that showed Post she could actually increase profits by reducing sales. He showed her that by cutting $521,000 in unprofitable sales, she could eliminate $640,000 in costs. Sloman wanted Diamond to eliminate all services and customers that didn't generate a profit, but Post couldn't do that and didn't think she should.
She decided, for instance, that some services she couldn't afford to operate herself, such as airfreight, were worth brokering on occasion in order to retain clients that generated profits for her elsewhere. And she replaced a few of the bikers with walkers, who now service select customers at a premium price. Still, in 1995 she forfeited sales of about $400,000 -- most of them willfully.
Post also raised prices for some of the work Diamond did. Now that she knew how to wield a calculator and could compute her average cost per job, she realized that she'd priced too many jobs at or below breakeven.
Perhaps the biggest change for Post herself was that for an entire year, she stopped selling. Instead, she threw herself into the task at hand -- visiting dozens of customers and writing to hundreds more affected by the changes she was making. And when that was done, she realized how much more work she still had to do -- work that continues. She hasn't stopped looking for ways to trim overhead. (Her operations manager doubles as a dispatcher, for example.) And now that she understands her cost of sales -- and her company's sales cycle -- she is prepared for cash crunches. In other words, Post no longer views her company through the narrow prism of sales; she now has the broader view of a CEO.
* * *
Today Diamond Courier is not the greyhound start-up it once was. The office is a lot quieter now. The rock-and-roll environment is gone; Diamond's baby-boomer managers have grown up. The company is healthier. There's cash in the bank -- which called recently to congratulate Post on her progress.
Post is healthier, too. She works out every day, and she's laughing again. She hasn't had to hock any stocks or jewelry in a long while; she recently rented a nice house for herself and her two sons. "I still don't balance my own checkbook, but I know now if my company is making money," she says. "Boy, do I know."
Thanks to a strong fall -- a good chunk of the $400,000 in lost revenues was made up with more profitable business -- Diamond managed to finish 1995 in the black, and the profits continued to accrue through last winter's snowstorms. Overall, revenue per job has more than doubled, from an average of $13 in 1993 to about $28 in 1995. Post and her managers think about sales differently, too. They're as likely to argue about which customers to drop as which prospects to pursue.
Now Post counts her blessings, along with her cash, every night. "I mean, I could have just spun out," she says. She knows so much more now. "I know what I need to break even every day," she says. "I monitor my payables. I know what my cash flow is and what's going into the bank every day. We created a budget, and I understand what it means to live budget-to-actual." A software program provides her with a daily report of revenue per job. "Look, I'm never going to be a serious financial person," she concedes, "but you own a business, it's your responsibility. I can't slough it off on somebody else. I have to know."
