"Well, you can either sell more items or just do things more efficiently. Either one will work," laughs Robert Footlik, president of Footlik and Associates, a consultancy that specializes in warehousing and distribution management services.

When people ask Al Bates for his advice, the two topics that by far predominate the conversation are concerns about being squeezed on margins, and payroll expenses—specifically health care and retirement programs.

"I almost don't get questions on anything else anymore," says Bates, president of the Profit Planning Group, a management-consulting firm. "This is what drives profitability. Once in a while I'll get asked about bad debts or inventory. But those are far less frequent."

And speaking of employees (sales or other departments), Footlik says that rather than cutting costs across the board, spending a little money can actually improve the bottom line in the long run.

"There are a number of opportunities that people need to explore more, but aren't doing," he says. "The number one opportunity is training. If you train people, they will stay with you. If you take a personal interest in providing training that can enhance their lives as well as their work, they'll stay even longer."

Footlik says he understands that, for a company trying to improve its profit margin, it can sound contradictory to hear someone suggest they spend more money. Many times a struggling company will respond by asking him, "Well, what can I do without spending a lot?"

Improving, or expanding, training is always at the top of Footlik's list of suggestions in these cases. But it is not the first thing companies want to hear, he admits, as many of them will instead find their attention being turned towards the latest technology trends, perhaps, or other potentially quicker remedies.

While technology is all well and good, Footlik suggests that exploring your company's day-in, day-out method of operation as a means of improving efficiencies can be the first and best step. Frequently, a need for revised and better training for employees will present itself. And, yes, that can mean it's time to spend money— "but we're talking peanuts and not the cost of installing a full-blown [computer] system, for example," Footlik explains.

Companies in trouble, especially, can be a bit "too open" to the first good sounding idea that comes along, he cautions.

"They'll be told that if you buy this machine, then everything will be hunky dory," he says. "Now that may be, but if you put in that machine, and you don't have your people trained in how to use it and they're not comfortable with it, it's going to die."

While Footlik's thoughts might be characterized by some as "easy for him to say" thinking, SIA Abrasives, Inc. USA, in Charlotte, N.C., took roughly the approach that Footlik was describing. SIA specializes in the manufacturing of abrasive systems for professional surface processing and refinement.

Russell Morris, general manager of the Charlotte location, and his colleagues looked at their efforts and studied what they were doing well and what they were not doing well or could improve. The operation was doing fairly well, Morris stresses, but needed to get better.

"We found a couple of things," Morris says. "For one, we weren't concentrating enough on improving service levels. That caused a lot of dual functions. For example, if you don't ship it fast enough or you don't do something right the first time, then you have to do things twice."

They also looked at their competitors in the general area and learned from them, when possible.

"We took a look strategically at our competitors and saw what they were good at," Morris explains, "and determined how we could make market share gains."

What they decided to do was spend money. They invested in both a new software system and the necessary training that goes with it.

"We spent a lot of money. We had to invest and we knew we'd have to do so," Morris admits. "We went through and did a lot of things both from our systems approach as well as with our computers. We put a whole new software package in and adapted it to our use here. It gave us much better control."

Morris estimates the investment in training and efficiency improvements reduced their lead time by as much as 80 percent. Customers now have little worry about getting materials on time, he adds, while the resulting cost savings enabled SIA to invest more in sales and marketing. That, in turn, has given them an increase in new business.

"We have a lot to do yet, like all companies," Morris says, "But the strategy is there and seems to be working. We are just continually trying to upgrade what we do and improve."

Bart Basi, president of the Center for Financial, Legal & Tax Planning, Inc., meets and consults with a number of distributors in his practice. Inventory valuation is one area that he suggests could be examined to make the bottom line better. He advises that companies re-examine how they are "charging their inventory out," as he puts it. When companies buy a product and put it in their inventory, many put it in at a certain figure—but it can often be the wrong figure, bottom line-wise.

"There are some 40 methods of valuing that inventory," Basi says. "Depending on how they do it, their bottom line can be effected because it transfers from inventory to 'cost of goods sold.'"

This can pay off in various ways. Basi told of a newly acquired client who over the years had been putting in his inventory figures a certain way. As Basi made himself acquainted with this client's previous methods, he realized that the previous method of doing his inventory had been costing this client in excess of $10,000 a year in taxes.

Profit Planning Group's Bates agrees that inventory can be a source of bottom-line improvement and sees more proactive efforts as essential to making this happen.

"There's more of an emphasis than in the past on trying to drain internal errors that may drive margins down," Bates says. "Companies will ask 'Did I mis-bill? Do I have damaged goods?' There's a pretty heavy internal control focus also going on. And as guys upgrade their inventory systems and get more sophisticated, their ability to control those issues—actually, their ability to even know those exist— gets a lot sharper."

So you've implemented some bottom line ideas and found them successful. And you keep reading that the economy is improving, numbers are looking better, etc. What then? Raises across the board? Company retreats to Aruba? Be it the thawing of the recession or new practices that have helped profits, Bates advises to take things slow.

"What we're encouraging people to do is take a slower approach, get all the profit out of this growth that you can," he says. "That can give you a war chest, if you will, and then next year you can grow [more]…. We'd like to see what I call 'managed growth.'"

When things improve economically, don't celebrate too soon. As Bates puts it, there's nothing like a 20 percent drop in sales to make you aware of this issue.

"I know firms on the industrial side that are actually down 20 percent from their peak. And they're anxious to get back to that peak," Bates explains. "When you've been beat up for a few years, laid people off, you want to get back to when it was fun."

Trying to rein in this enthusiasm can be more difficult than common sense might suggest.

"Human nature is that when sales start going up, companies think 'Well, so-and-so hasn't had a raise in three years. He's overdo for a catch-up,'" Bates says. "We've seen that coming out of every recession we've ever had. These [owners] are largely optimists anyway, or else they wouldn't be running companies. I tell them to be tough on expenses one more year than you thought you should."