A profit enhancement group, or a PEG, is one way to take advantage of the accumulated wisdom of several business peers, while simultaneously contributing to that body of knowledge. The groups are made up of business owners in the same industry – but from non-competing markets – who evaluate each others’ companies.
John Winter, owner and president of Winter Moving & Storage in Bentonville, joined a group in 2006.
Winter has owned his business for 28 years and he has seen many changes in the moving and storage industry. Fifteen years ago, “things were different,” he said. “You either try to keep up and do your part to meet the demand, or you get left behind.”
At a 2006 industry convention in Dallas, Winter was invited to join the group, which was organized by Management Growth Institute Inc. of Rochester, N.Y. Members of the group pay an initial fee of $3,500 to join and travel two to three times a year at their own expense to conduct evaluations.
He was hesitant at first “but my expectations were met and exceeded,” he said.
Though he did not disclose revenue figures, Winter estimated the PEG has improved his margins by 2 percent to 3 percent, and he expects that could reach 5 percent by this summer, typically the busiest time for movers.
The business owner whose company is being evaluated prepares an informational packet for the other members 45 days before the evaluation. The packet details every aspect of the operation and how it’s run, including all financial records.
Members of the PEG typically fly into town on a Wednesday night and spend the next three days poring over every angle of the business. On Saturday morning, everyone meets back up for the final analysis.
“It’s a heck of a commitment,” he said of the evaluations. But every evaluation has been a learning experience for Winter.
“I just don’t know where else I could get this kind of feedback,” he said.
MGI Organizes Winning PEGs
Management Growth Institute Inc. started in 1961 as a consulting firm addressing common problems facing businesses of different types.
In 1976, the company organized its first profit enhancement group, said Kathi Barry Albertini, CEO of MGI.
Since then, the company has assembled PEGs made up of leaders in several different industries, including building material distributors, fruit and vegetable distributors and retail jewelers. MGI has also worked with Brandon Moving & Storage in North Little Rock.
The annual fee to join one of MGI’s groups is $3,500 for three meetings a year. The company still does some business consultation, but the PEGs are its main product.
Although Albertini did not have hard numbers for ROI, a member of one group of movers said a consulting firm had quoted him an estimate of $30,000 to address a problem the group solved for his business in one meeting.
Typically, the types of businesses that will benefit most from a PEG are privately owned companies that aren’t heavily regulated by the government.
Many of these businesses are family-owned operations that have gone past the infancy stage – and perhaps a generation or two of succession – that need to improve some aspect of operations because either the industry, the product or the overall economy has changed, Albertini said.
MGI provides group directors, who have all had experience owning a business.