Emulate successful companies’ business practices, not just their marketing ideas.

Americans spend billions of dollars each year trying to look like famous and successful people. It is as if we’re obsessed with outward appearances. Here is a perfect example: I was thumbing through some of the People-type magazines - the ones with millions of readers each month, including my wife and daughter - and there were entire sections in each magazine devoted to “what the stars are wearing today!” There was even a section on the hairstyles of Hollywood starlets and one on the varying hairstyles of the recent First Ladies.

There was a two-page spread of up-close paparazzi shots of the latest handbags being toted around by the Olsen twins and Angelina. Yes, it is safe to say many of America’s women are obsessed with outward appearances.

It is the same thing with men, by the way. If Tiger Woods is wearing it on TV today, you can be certain you will see it on John Q. Public tomorrow. “If I dress like Tiger, maybe I, too, can hit an 8 iron 180 yards - and marry a Swedish bikini model.”

Now, as we all know, many of the “pretty people” are not necessarily worth emulating. Sure, they look good and wear the latest fashions. But when you get right down to it, some of them you wouldn’t trust to watch your dog for a weekend, much less model your life after them.

There is much wisdom to the saying, “Beauty is skin deep. It is what is on the inside that counts.”

Now let’s talk about contractors. Could many of us be suffering from the same affliction of trying to emulate the outward appearances of successful contractors without emulating what they have on the inside where it really matters?

Contractors are notorious copycats. A leading competitor introduces a new and interesting Yellow Pages ad with an innovative service guarantee. You can bet the mortgage that a local competitor will be in next year’s book with a copycat ad almost word for word (the “On Time Guys” thing with the stopwatch has many variations).

Service trucks are the best examples of me-too-itis. The big company in town goes to large, well-marked trucks and again - you can take it to the bank - almost all the local competitors will eventually follow suit.

Now, none of these things is necessarily detrimental to the business. It is just missing the point.

I wish contractors would spend more time copying what is on the inside of successful companies vs. what is visibly displayed on the outside.

The P&L

If there is one thing you want to copy, more than trucks and advertising, it should be a successful contractor’s income statement and balance sheet. Highly profitable service companies’ income statements look amazingly similar. Their cost of goods sold (direct labor and material) is 40 percent or less. Their advertising expense is 12 percent or less, office wages 15 percent or less.

Companies eking out an existence are always out of whack in one or all of these key cost areas. If you want to look like a successful contractor, start here by getting these key percentages in line.

The balance sheet is another area to emulate. Cash is king, and successful companies have it. Their current assets are not all locked up in receivables and inventory. As a result, they have the flexibility to invest in new strategies and people because they are not living on the edge financially. This gives them great freedom to manage their business for the long-term.

If you don’t have lots of cash, there are only two ways to get it without incurring more debt: start making a profit; and convert noncash assets like receivables, dormant vehicles and inventory to cash. No startling revelations there, but it is surprising how few contractors think in these terms.

The Owner

Successful companies are led by people with the ability to implement and inspire. What does the ability to implement mean? These leaders have the ability to focus and get important business initiatives successfully implemented. They do not start 100 projects and get none of them fully implemented. They make a list and go to work getting the highest-priority items done first. They bring energy and commitment to what they are doing every day.

Relative to inspiration, they also have the ability to get the most out of their employees. Not with a bullwhip and the ominous threat of firings, but with a vision that tomorrow is going to be better than today. There is a pervasive sense of optimism throughout these companies.

If you are an owner and I am not describing you, you had better change or find someone who can overcome your deficiencies if you want a highly profitable and growing company. This leads to the next important quality of successful companies.

The People

I have spent a great deal of time in past columns talking about the people in your company. You go inside any great company and you will find great people.

If you read any business book, it will say, “Hire people smarter than you.” I generally agree with the statement. I have worked around a bunch of people who were way smarter than I am but a few of them - how do I say this - seemed to be above working hard every day.

So, I would like to amend that time-honored management principle to read, “Hire people smarter than you and keep them employed if they like to come to work on time.”

Great companies are filled with great people. They are not necessarily intellectual geniuses. I don’t think this is really needed. I will take hard work, dedication and honesty over pure genius any day.

So look around your company. Is it filled with talented, hard-working, dependable people? If it isn’t, you don’t look like a successful company, no matter what your Yellow Pages ad says or how much inventory you carry on your “Super Truck.”

Sense Of Urgency

All of the previous items are tangible. You can go into the business and see it right away. There is also a common inside quality of successful companies that is less tangible. It is a sense of urgency.

Let me give you an example. Last winter I was in one of the largest residential service companies in the country. I was there during the meltdown of the credit markets, when many of the residential credit lenders were tightening up their approvals. This company’s main lender for furnace and boiler sales had just that week begun to reject virtually all credit applications. As a result, the company lost four sales in two days.

The owner and I were discussing this state of affairs and I asked if he had any relationships with local banks for equity lending. He said he didn’t but thought it was a good idea. I talked to him later that same day and he had already set up meetings for the next day with four local banks to discuss consumer credit programs. That is what I mean by urgency.

If it is a good idea today, it is worth doing today. Highly successful companies have the ability and willingness to jump on an opportunity or address a problem right away.

The P&L, the balance sheet, the people, the owner and a sense of urgency are the things we should be emulating. These are the things that matter. The outward signs of success come second and take a backseat.

Got to run - I have a tee time and I can’t wait to try out the new driver I bought after I saw Tiger Woods use it last week on television…

Do what I say, not what I do.

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