The Deadline Is Here
I recently reviewed in this column the many aspects of a service and repair business that must be addressed - cleaned up in some cases - for the business to be even considered for sale. Since many of these items take a significant lead time to implement, getting busy and updating the business, its facilities and management practices is not something you can delay.
I mentioned the office, the shop, warehouse, trucks and other physical aspects of the business that may need attention - even the outside. And though selling may be the furthest thing from your mind, you eliminate the option to consider it if these operational aspects for your business are not in place and running smoothly.
There are many tangible and intangible factors that can make a difference in allowing the service and repair business owner the option of selling the business some day. I would like to supplement my previous discussion with a new perspective and more specific suggestions. I want to cover the inside operations, not just the physical assets of the business. Let's examine the front office workings, software, management and financial practices.
However, a significant factor has surfaced that we must recognize, one that's very relevant to our planning and implementation of changes. Let's look at it first.
The Time Is NowOne aspect of retaining the flexibility of selling or not selling is the time frame for attracting buyers - let's call it a window of opportunity. The appearance of that window (and it never stays open forever) has been accelerated. Instead of showing up at some indefinite time in the future, it is arriving sooner. In fact, real soon - in a matter of a few weeks.
Our perspective, then, needs to change. Instead of looking at a few management tips to apply to our businesses (i.e., taking our time to maybe try one, then another, and see what happens), we need to move faster and be ready when that window opens. We are like the good guys in the movies who see dust on the trail miles away. We know the time has come to expect guests - guests bringing money in this case.
Nobody can predict the exact cycles when there are buyers who want to pay you for your business or consolidate it with others that are equally well-run and successful. Sometimes there is more money available to invest in these types of ventures and sometimes it dries up.
We have already seen such a cycle in the last decade: first there is money available, then it's gone. The successful, well-managed investment companies that know or learn the service and repair business get in early, buy the good companies, and then end up with significant chunks of the market. And they usually deserve it, with their smartly uniformed technicians, modern and clean trucks, efficient warehouses, and technicians enjoying incentive-based pay. Who wouldn't want to sell to or work for those businesses?
The companies, consolidated or not, that cannot offer the customer what they demand (and they are getting more demanding) and lead the industry ahead of the competition will suffer.
So we have two important issues. One is the time frame and the other is the result of the industry changing. Be ready, be competitive or be lost in the wake of the next wave of change. It's here now.
Status ReportMy concern and feeling of immediacy has been substantiated by my recent visits to numerous companies and my discussions with business owners. Conclusion: they are not ready. Many, if not most, could not get past the initial qualifications required by the strategic-thinking consolidation analysts. There will be no second chances for some time, so I have noted several practices and resources that need attention.
The standard is simple: Build the business for sale - even if you never intend to sell. Otherwise you lose on two counts. First, you may have no opportunity to sell; second, you may not be able to compete with well-funded, competitive businesses that have modern equipment and professional standards throughout their business that match the best in the business. Building it for sale means meeting customer needs, while making certain the manager/owner has the time to make the long-term decisions necessary to keep the business a leader.
Dump DisruptionsOne of the biggest limiting factors to effectively managing a service and repair business - meaning that you make decisions that advance the business, not just put out fires - is disruption.
Most business owners have a laundry list of “to-do” items that are minor administrative tasks. Of course, they need to be accomplished, but those constant, nagging little issues take a manager's time. Unfortunately they don't make any money.
A combination of delegating routine tasks and automating as much of the minor decision-making as possible can be accomplished by using procedures and practices that free the boss up for hours a day. Routine tasks can be accomplished by someone other than the owner. Doing away with some of the unneeded paperwork can help, too.
Computer SoftwareTo meet these objectives, software can help. The accounting packages today will permit a practically paperless office. Everything can be available on the computer for easy reference, not only financial statements but financial projections, management reports and even payroll. No one should need to be filling out written reports or entering rows of data. Reports should be integrated, too.
For example, “integrated reports” means that when each job is complete, data is available that goes to the warehouse to replace parts used, and data goes to payroll to apply earned fees to the technician. All the information for the job was sent to the technician by electronic means, and he sent the invoices and related data to the company. Those are just a few of the combinations of integrated information that modern companies use to speed the availability of and access to company information.
Dispatch is not to be ignored when we are discussing software. There are now software packages that permit all of the necessary functions of the business to be coordinated to the point where data is shared and accessible by every department. Reports can provide managers with relevant information in such a timely way that they can improve their decisions and run the business more efficiently.
Output DataWhen reports are available on a daily basis, problems and opportunities are identified early. For instance, do you know the billable hour efficiency of your technicians, or the average invoice each technician sells? How about the miles driven by each technician, or total truck miles?
All of that data will permit prudent managers to look ahead, cut costs that are out of line, and track expenses in detail. An additional benefit is the capability of demonstrating excellent financial records - an attractive feature for a company that could be looked at for purchase.
By coordinating inventory in the warehouse and trucks with good software, there are no mysteries on what's available and unnecessary trips to the supply house are reduced. Again, control of resources saves money.
People PowerWell-compensated and motivated people make a business not only attractive to investors but profitable to the owner. One way to build and maintain a team of motivated technicians is to provide incentives for them to increase your business and better serve the customer at the same time. Incentive-based pay only makes sense when you are paying for people to sell the services your company offers. The more they responsibly sell, the more they earn.
There are some limitations on how you pay individuals and how you offer incentives or bonuses to individuals normally paid hourly. Check with your accountant to discuss what is permissible and what isn't.
The best-performing employees usually seek incentive pay arrangements because they know they will benefit from the incentives. Individuals trying to get by with the minimum amount of work will shy away from such pay systems. Hiring the best people has to be a dynamic process. Keep productive workers and seek the best the industry has to offer.
Customers RuleEven professional management and recordkeeping won't benefit the business much if customers are not put first. One way to apply good practices, modern software and efficient business operations is to let no customer get away. Your telephones are one good example of a part of the business that can demonstrate the importance of your customers.
Every call is important; every service call is important. Never should a customer have any doubt that their problem is important to your business and your employees. Trained customer service people and technicians will prove that you are focused on meeting the customer's needs.
Repeat business is a good indicator of how the customer was treated on their first experience with the company. Customers who call back reduce the cost of acquiring a new customer, and they refer other customers.
I hope this column was food for thought. If you have not implemented the changes that are needed in your business, whether you are planning to sell or not, it's time to act. Don't wish you had prepared after the opportunity is gone.