Kenny Chapman: The 4 profit drivers
If you’ve been in business for any length of time, I’m pretty sure profitability is important to you, and an aspect of your company that gets plenty of attention. If it isn’t important to you, then don’t bother continuing to read this, but I’m sure you know that if you aren’t profitable, your business won’t exist very much longer.
What really drives profitability and truly impacts your overall results? It might not be what you think. You could say it’s fixed and variable costs, sales or the other line items on your financial statement, but it’s really the things that impact those numbers that matter. It’s what is behind each number on the spreadsheets.
In my opinion, these are the four aspects of an in-home service company that do the most to drive profits every day.
Your purpose and vision
The majority of business owners who contact me when their company is struggling are also having a hard time with their vision and purpose. They are the leaders; they are the ones their team members look to for guidance, yet they need guidance and direction themselves.
Team members want to know the vision for the company and to be part of something bigger then themselves. This is particularly true for the millennial generation, so if you are having a hard time recruiting younger talent, you will definitely want to examine your vision.
If you feel like you’ve lost some of your passion for the company, or even some confidence in your purpose and vision, I have a couple pointers for you. First, do a “positive focus” exercise. Write down all the wonderful things happening in your business and life, and give yourself a pat on the back for everything you’ve accomplished. Remind yourself why you got into this business in the first place.
Second — and this always helps me — is to study some of the great entrepreneurs and thought leaders of the past and present. You don’t need to model exactly what they did, but their successes help put things in perspective and provide great strategies to help with renewed vision.
Your processes and systems
Profitability and efficiency go hand in hand, but all too often, the systems — or lack thereof — that make a company run efficiently are outdated or neglected. I hear “Oh, yes, we have systems, but nobody really follows them,” or, “I just do whatever needs to be done at the time.” Unclear roles, duties, systems and processes can truly lead to the death of a company.
It might sound extreme, but it’s true. Without accountability systems, detailed record-keeping and reporting, written job descriptions, sales processes and so forth, how do you really know what’s going on? Things (and money) easily fall through the cracks, and before you know it, your profitability is suffering, along with your client service and overall efficiency.
If you don’t have great systems in place now, or if they are outdated, start with documenting time and tasks for every individual, starting with yourself. This can be a time-consuming task, but well worth it, and it helps if you have a consistent way of doing so. Remember, when you’re creating systems in the business, the “heavy lifting” you’re doing will pay off and you won’t have to keep doing the same things over and over and fighting the exact same fires day after day. I will personally send you a simple system inventory checklist to get you started if you email me through my website requesting it.
Your team members and leaders
This is the profit driver that is most often undervalued, partially because it’s hard to measure with numbers and percentages. This is also the profit driver that is not only a profit driver but also an existence driver. If you don’t focus on your leadership team taking care of your entire team, you are sure to find yourself in a downward spiral that can be hugely detrimental to the business. I’ve personally watched this lack of focus on team member value destroy multiple companies just this year.
I believe team members and culture should somehow be measured on our balance sheets. Profitable, game-changing companies create their own KPI (key performance indicators) around culture, retention and how happy their team is overall throughout the year.
We are seeing team members control company destiny like never before in history. Technicians leaving on payday never to be heard from again is more common than ever, and 30% show-up rates to previously confirmed interview appointments have become normal. As costly as turnover is, and as we are facing a shortage of experienced technicians and salespeople, culture impacts profitability on a massive level.
My advice for you? Train your team, take care of your team, involve your team, and listen to your team.
Your current client base
Phenomenal economies like we’ve enjoyed in 2018 can tend to make us very lazy and sloppy as business owners and operators. I suppose there’s some human nature of “path of least resistance” involved, but as we know, this path is usually not lined with freedom and profit.
It’s almost too easy when demand is greater than supply. Most companies that fail are ruined when it’s busy; they just don’t actually die until it slows back down. It takes a little bit for the aftermath of careless operation to catch up. The consequences of not returning phone calls, not following up on proposals, not making happy calls, and not keeping up with online reviews don’t always show up immediately.
I’ve helped many companies realize there is a balance between chasing new business and the opportunities that exist within their current client base. Our Blue Collar Success Group clients who are growing anywhere from 50%-150% per year understand the true lifetime value of a clients and take massive action around maximizing this value with every interaction and relationship built. New business is exciting and necessary, but without a loyal and consistent repeat flow of return clients, you will never win the profitability game.
The service business can seem complicated and feel overwhelming at times. That’s why it’s critically important to maintain perspective and stay focused on the true drivers of profitability — not just the numbers on a spreadsheet or financial statement. Concentrating on what is important long-term, not just running around putting out fires, will ensure your company is strong and set up for success despite fluctuations that will inevitably happen within the business.
When the four profit drivers are strong in any business, increased growth, freedom and profits are just an execution plan away.