We have enjoyed about eight to 10 prosperous years in our economy. As a result, business has been good for many companies. But a lot of business owners have become complacent, assuming that what worked the last few years will work in the future. As the economy slows that is not necessarily the case.
For one thing, competition for the customers' dollars will increase. They will demand more service for their purchasing dollar and can afford to be less tolerant of any unprofessional service practices.
As soon as you are willing to look closely at your management practices and financial statements, you are ready to maximize the return your business pays you.
Sadly, some businesses fail or suffer dramatic reductions in sales and profits every time the economy takes a downturn. The dangerous part is that it sneaks up on the owner and they are often lucky to salvage the business by the time they realize what happened. Sometimes it's too late. Action, not just ideas, will have to be part of every successful service business owners' obligations to insure results. Here are a few actions to consider:
Action No. 1: Personnel/FacilitiesOne of the first actions any business owner can take is to get better control of the overhead in the business.
For instance, when times are good we often add a few staff people to take care of those bothersome tasks and assist in the smooth operation of the business - maybe an extra warehouse assistant or an executive assistant in the office. Preparing for tough times would include analyzing the real need for some of the people you have on the payroll. I usually find they are staff personnel who we didn't need a few years ago (and can probably get by without now).
During a downturn is not the time to add additional facilities that would be nice to have but aren't essential to the efficient operation of the business. The same is true of purchasing equipment; if you can get by without it, put off buying it until the economy turns around. You may wish you had those dollars a year from now, or wish you weren't making monthly payments that soon may represent a chunk of your monthly net profit.
Cutting overhead is one of the key ways to keep your margins at a satisfactory level. You may have heard me or read my past columns discussing the many ways to boost revenues, but in tougher times the overhead may be the easiest part of your profit formula to adjust quickly.
Action No. 2: Tracking CostsIt surprises me to see what business owners track. It may include numbers of truck miles or types of jobs completed or any one of a number of other factors. And who knows what they do with all that data. What does it tell them and how do they modify their practices with the feedback they receive?
For example, tracking the number of calls per day a technician makes can be short sighted because, as we found, a technician who thoroughly surveys the customer's home for potential business may discover several additional, legitimate jobs that need to be done.
The additional jobs increase the amount of business that technician produces, but reduces the miles he drives. The data that would be more beneficial in those situations, which you should encourage, is the average invoice amount. I would much rather have a technician complete only two calls a day with a $500 average invoice amount than twice that many with only $200 per average invoice.
In lean times, one of the most important activities that a manager can spend time on is tracking costs and related productivity measures. What you really need to be seriously tracking are the data related to productivity, including job costs; costs per hour of technician time - anything that measures how productive your team is at completing service work.
Action No. 3: Get HelpWhen I refer to help from consultants, many business owners' eyes glaze over and they lose interest. They may have tried or heard about generic consultants who offer organizational training or some other guidance on the fundamentals of business, maybe accounting or payroll systems.
No, those are not the kind of specialists I am talking about. I am referring to people with hands-on service and repair business experience. Professionals who can pinpoint what you need and then get out of the way.
Today, there are many sources of cost-effective help that a business owner can acquire. Most of you are aware of the training programs available for your people, from management programs to customer service programs for technicians to telephone procedures for call takers. There are also success groups to present the professional tips that will help you grow and better operate your business. All these sources can benefit you and be effective - if they are satisfactorily implemented. That seems to be the weak point for some businesses.
For the businesses whose owners are too busy, may lack the confidence or are just uncomfortable in implementing the techniques that are proven to increase productivity and profits, a personal coach seems to be the answer. The service is offered under different labels, but the goal is the same: get the business on track for higher profits, protect its business in tough times and provide systems the owner can use comfortably to manage the business on a daily basis.
In some businesses, I can determine the level of effectiveness of their management within a matter of a few minutes. A quick glance at the cleanliness of the place, the sense of order, their computer systems for tracking data, accounting and dispatching tell me where they are on a scale of effectiveness.
By digging deeper and using a proven systematic analysis of all critical management and financial systems, our team is able to pinpoint the areas needing attention and assist the owner on the spot in refocusing the business. Once a few of the fundamentals are adjusted for maximum effectiveness, the business is back on track to provide the owner what they deserve - a better return from their business.
Even though the initial cost is higher, it can be very cost effective for a business to get things moving when it comes to changing management practices, implementing cost controls, flat rate pricing, service agreements, better customer service, etc.
Sometimes it just takes that little extra nudge for the business owner to take the steps necessary to make their business take-off. Or, maybe, the owner just needs someone with a little bit more background in the business to give him or her the confidence to make a few changes that will continue to pay off for years to come.
Regardless of the reason, private training and coaching from an experienced team can quickly detect the shortcomings and point the business in the right direction.
If you haven't scrutinized your processes and positioned yourself for a slower economy, it might be time to get with it - or get some help.