Keep Your Eye On The Prize
The business environment is finally improving. Whew! Good to get that recession behind us.
Here at Nexstar we track the year-over-year sales growth of our members. It was the spring of 2010 when we finally started to see overall revenue gains against the prior year across our membership. Last year was an outstanding year in the HVAC industry, which was significantly healthier than the plumbing or electrical service industries. However, in late 2010, those industries came to life and have now surpassed the HVAC industry in year-over-year sales growth.
The point is, the overall service and repair industry is growing right now. That is a good thing. However, it is far from perfect. If you look, you can always find reasons for concern such as the deficit, gas prices, Middle East uncertainty - the usual culprits.
During the recession, most smart business operators realized they had to be laser-focused on driving out unnecessary costs in the business in order to keep the doors open. Many times these expense cuts involved letting good people go. It was difficult, but an unfortunate reality during tough economic times.
Once expenses were trimmed, all remaining time was spent driving sales. With less buyers in the market, each company had to work extra-hard to get consumers to part with their hard-earned money. After all, consumers also were trimming expenses. Smart operators knew each day they had to bring their “A” game - no distractions and everyone keeps their eye on making sales and converting those sales to profitable revenue.
More than one economic pundit has said recessions, while not fun, are good for business. It forces companies to trim waste and improve business processes. Having lived through three of these recessions in my professional life and with the memory of the last recession still very clear in my mind, I tend to agree.
Working smarterWhat I now see with the companies I work with are smarter, more streamlined organizations. When the recession started to ease up and revenue started to rebound, profitability really improved. More of the revenue brought in dropped to the bottom line than before the recession.
Companies learned to adapt to supporting more revenue with less overhead. People become a little more accustomed to working hard to make sales and get those sales installed profitably. Good habits were formed. One Nexstar member made a very interesting observation: “Never waste a good recession.” In his case, the recession provided the stimulus he needed to make very difficult changes in his company, which allowed him to have his best year ever during the height of the recession.
Now that we are 12 months into the recovery, companies are slowly hiring new employees. Today, I am having conversations with owners who are contemplating adding new management positions to their companies. Two years ago, virtually 100 percent of the management team conversations were about who to cut. Today, owners are again making investments in software, vehicles and new marketing campaigns. All this is a sign that optimism is returning. It is all good. Or is it?
You must prioritizeI was talking to Scott Pearson, new member coach for Nexstar, about this and he brought up an interesting observation about how the activities of optimism can result in huge negative consequences for a company. As an example, he mentioned how common it is for a company to be really growing and doing fantastic. Then the owner makes a fateful decision to move into a larger, state-of-the-art facility. What seems to happen all too often is right at about the time they move in, there is a decline in the business.
Together, Scott and I ticked through a list of companies we personally knew suffered this fate. It was a long list.
The good news is nearly all of these companies ultimately righted themselves and improved. However, in some cases, they lost years of profits before they got back on track. What happened?
Prior to moving, these companies had highly motivated owners leading highly focused management and field-service teams. They were focused each day on driving the business:
- What can we do with every waking moment to gain new customers
and satisfy our current customers?
- Who can we add to the field staff to improve efficiency and grow
- What new marketing strategy can be deployed to improve company visibility and lead flow?
However, once they started to think about moving, focus shifted to other items such as: what part of town to move to, office layout, color of carpeting and the number of flat-screen TVs needed.
So each day for months, this is where their focus went. It went to carpet color, not customer service. It was consumed with cubicle design, not sales. The management team also was brought into the “carpet conversation.” How should the office flow? What kind of office space do they need or want? When the managers were not involved in direct conversations on “the move,” they were left to their own good judgment on how to spend their time with the owner preoccupied in other areas.
Each business lost focus and started to drift. There was no conscious push each day by owners and managers to drive the business. After all, they were consumed with lining up drywall contractors or meeting with architects. Those activities took priority over hiring and training new technicians, meeting with dispatchers each morning and watching call counts.
Moving to a bigger and better location is not a bad thing, but it is not a business-building activity. It is not a strategy. It can’t become the primary focus of the management team. It is like any other trapping of success. You work hard so you can achieve and gain, and then the very thing your success allowed you to acquire or do results in a financial or personal setback.
It is easy to say, but the moral of the story is you can’t lose focus on driving sales and converting those sales to profitable revenue when times are good. If you, as the owner, are going to be preoccupied each day with noncore business activity, you had better be 100 percent certain a trusted management team is dialed into driving the business every day. If you don’t, you may fondly look back on the “salad days” of the Great Recession of 2009-2010 and wish those good times would return again.