Based on these interviews, as well as my own 26 years of experience in the PHC industry, I have developed a list of the 10 keys to managing a profitable company in today’s economy.
1. Own the business. Do not wait to be told what to do or exactly how to do it. If you don’t know, ask. And take responsibility for everything.
Today you must manage with a sense of urgency, which will come naturally if you stay focused. You must improve your business every day and work hard to do it. You are expected to be accountable for everything that happens in your company, and should be held personally responsible for the results — financial and operational — of the company.
2. Manage the balance sheet. This is the shareholder’s money over which you have been given stewardship — act accordingly, it is your money. Know every account and its balance yourself — take no one else’s word for it. Use comparative balance sheets as a double-check on the P&L statement.
Accounts Receivable: Know every account that owes you money and why, without exception. Assign someone to be responsible for credit extension and collections and hold them accountable to a high standard (0 over 90 days balance). Collect payment as early in the cycle as possible, meaning COD in many cases. Residential service should be COD without exception. Be involved in the process!
Inventory: Keep the inventory worth 100 cents on the dollar. Get rid of any junk. Keep inventory secure at all times. Be relentless, insisting on absolute order in the warehouse. Use POs for all purchases; insist on accurate inventory expense on the P&L and complete a physical inventory regularly to ensure inventory integrity.
Know what everything is, why it is there and when it will move out, without exception. Carry enough equipment to feed the beast, but seek to reduce inventory levels on the balance sheet. Take personal responsibility
Fixed Assets: Know what you own, where it is and why you own it. Use the assets to make money, or get rid of them.
3. Know your break-even and operate the business above it. Strive to accurately forecast future sales/profits. Size the business to the opportunities for sales; use profit improvement plans to “change” the future to maximize your return on investment; and work on top line growth. You cannot tolerate profit loss. You need to know when your sales are trending below budget and must react with a high sense of urgency to improve the outcome.
4. Be intimately involved in sales. You must be very familiar with the dynamics of the selling marketplaces in which your business operates. Oversee all pricing and commissions. Great salespeople are essential to your success. Always make certain to staff with enough salespeople who are willing to work at night and on weekends as needed to adequately run all sales leads. Develop a sales-driven competitive culture:
- Establish a referral program — the economics are very compelling;
- Develop and update a “Sales and Advertising Plan” with monthly commitment and expected results. Share with all team members;
- Track, measure and monitor everything! You should use lead source tracking, specific goal setting, performance tracking and reporting. Hold team members responsible for their performance; and
- Report sales performance in detail on a daily, weekly and monthly basis.
Personally negotiate key initiatives with primary vendors, including training, advertising co-op, rebates, marketing programs and discounts.
Develop business partnerships with your key vendors, share business plans and expect their help to increase your market share and profitability.
6. Establish consistent hiring and pay practices. Strive to be the premier employer in the marketplace — pay the highest wages and best benefit packages possible. Set high expectations and hold team members accountable for performance.
This is the most important step that can be taken to improve quality and build the health of the business long term. The people you work with are a direct reflection of your leadership. Establish a sensible performance-based bonus plan for department managers.
Your co-workers are your most valuable assets — do not cheat them, hold them accountable.
7. Produce accurate financial statements. Both you and the accounting manager must stake your reputations on the numbers. You need to have complete financial statements by the 10th working day of the following month.
8. Communicate. Share your vision with passion to every co-worker in your company, every chance you get. When in doubt, over-communicate to your co-workers. Establish specific expectations, demand high performance, relentlessly measure personal performance and report results on a regular and timely basis.
- Conduct weekly management meetings with an agenda.
- Participate in weekly sales meetings.
- Facilitate monthly safety/informational meetings.
- Review financials, budgets, forecasts, sales management and profit improvement with your management team on a monthly basis.
Well, the question you should ask yourself is, “What will happen to my company if I do not train them and they stay?” The long-term success of your company depends on you developing the people that you work with.
10. Set goals for the company. Your company should have at least three set goals for this year. These should be goals that everyone knows and understands. The goals need to be posted in your place of business, and your co-workers kept up to speed as to how you are progressing with those goals. Once a goal is achieved, it needs to be celebrated and a new goal added.
The QSC and PHCC members I talk with are taking advantage of educational opportunities available to help attain the 10 keys of effective management that I have mentioned. I wholeheartedly support the idea of seeking help through membership in trade organizations like these. It can only make your job easier.