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Columnists / Jim Hamilton: The Bottom Line

Play to win

It's your choice to succeed or fail in business.

April 19, 2013
Hamilton column inbody

It’s April and your first quarter is behind you. Are you ready for your second quarter? Are you playing to win? Have you chosen a winning team and chosen to cross your goal line without being tackled by the fiscal cliff, debt ceiling, change in tax credits and tax reform?

Don’t be like my Kansas City Chiefs and Royals. My Chiefs are on their 43rd year of rebuilding and I’ve watched my Royals do the same thing for the past 28. You see, I’m a business coach and I see many parallels between coaching in the office and on the field.

If you’ve chosen your team wisely and have your head in the game, nothing can stop you from reaching your goals this year. Now, I’m not going to  say, “Hey, don’t worry about it,” but I am going to tell you not to dwell on it.

Independent business owners across America wake up every day with the pressure of making their businesses work and some wake up with the added pressure of making their business work better than it did last year. Some even step up the anxiety level a notch or two with the pressure of making their business work better than everyone else’s. I don’t know where your head is in the game, but my guess would be that you fall in there somewhere.  That’s your choice.

Your business can be what you choose

I have to turn back to economist Brian Beaulieu, CEO of ITR Economics, who says the worst is over, so far.  So far is the key phrase here. He says the economy will rebound in the next couple quarters and keep moving upward for the next few years. Then, doom and gloom returns in 2017 with the start of more economic turmoil. How bad will it be four years from now? Well, according to Beaulieu, that depends on the maturity of our political leaders in Washington. They have a choice to make — pay now or pay later.

I’m sharing this with you for a reason. It doesn’t matter what the guys in Washington choose to do. What matters is what you choose to do. It really is your choice, so put your blinders on to shield yourself from this global noise and play to win with your business, your customers and your local economy. You can become your local economy. Thrive. It’s your choice.

Easy to say, right? Hard to do? Again, that’s your choice. If you believe it will be hard to do, you’ll be right because you’ll let it affect your success. I believe it will be hard to do, but I also believe that good results take hard work and reoccurring good results take focus. Choose to focus on setting up a business that runs on reoccurring, predictable processes.

Work smarter

You can work hard,  work your fingers to the bone because you think you should. After all, if it were easy, everyone would be doing it, right? What you  also should do is work smarter.

Working smarter means documenting your successful business processes and redesigning the unsuccessful ones. Create processes that can be duplicated, so that even I could do it! If you can teach me to do it, you are well on your way to becoming a huge success. Otherwise, you look over your shoulder and worry about what the pinheads in Washington are doing to you.

Make the most out of this year. When you see roadblocks in your way, don’t complain that you can’t bust through them because, because, because …  Anyone can make excuses. Youcan make things happen. When you are faced with a roadblock, figure out how to eliminate it, get over it, get around it or go through it.

Here are three strategies to help you along the way:

  1. Look at your first-quarter results. This is not going to change your first quarter, but it will shed light on what you can do to improve your business for the next three.
  2. Review your financial reports, financial statements, balance sheets and cash flow
  3. Run and review operational reports. Track sold hours, number of service calls run, call conversion rate, average service sale, install leads generated, lead conversion rate and average install sale.

There are many more things you can review, but these are the basics. If these reports are available to you, that’s great. If you don’t have them, it will be hard for you to be great.

How sales are managed is critical

Now, let’s talk about your install report. The first place your eyes will generally go is to the sales total. Ninety-nine out of 100 contractors will do the same and that’s not bad, but the way you manage your sales is much more important.

I’m sure you’ve heard of these multimillion-dollar companies: Circuit City, Morgan Stanley, Lehman Brothers. They went broke! It wasn’t the sales that killed them, it was the way they managed their sales. It also could have been their selling price. Nexstar Founder Frank Blau Jr. shudders when he thinks of these companies because he would have liked the opportunity to teach them something that could have saved them.

You can look at sales totals, but first you need to look at your gross profit percentage and dollars. If you earned 46% to 50% gross profits for your installation department, you are on your way to double-digit net profits. If you fell short, all is not lost. Look at your gross profit dollars variance as it relates to your budget (yes, you should have a budget!). A positive variance gives you a shot at a profitable first quarter, assuming you managed the overhead cost to your budget.

Let’s say you missed your gross profit target. What do you do? Only three line items impact the gross profit percentage of your installation department: materials and equipment cost; labor cost; and sales cost. Did you manage all these costs  correctly? How would you know? You should have a key performance indicator for each line item.

A solid benchmark for material/equipment is 35% of sales. Labor would be 8% of sales and sales cost would be 8% of sales. Add these up and subtract them from 100% and your gross profit should come out at 49% of sales.

KPIs aren’t gospel, but they are indicators. If you’re not reaching these KPIs, ask yourself why. Could you be paying too much for equipment? Could your pricing be wrong? Could your materials be walking out the door? Could your installers be milking the hours on the clock, causing them to be less productive? Could your pricing be wrong? Could your sales compensation plan be out of wack? Could your pricing be wrong? It’s up to you to dive in, figure out what’s wrong and make changes for the future.

It’s your choice. You choose how to make your business better. Don’t let anyone choose that for you. You are in control. If your business wins, it’s because of you! If your employees win, it’s because you set up a great business for them to thrive in. You made this happen. No one did it for you. You did it on your own. Now, if you need guidance along the way, call me. I’d love to help you. I love working with people who refuse to lose.


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