The success of your business is in your control
New year, same focus.
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| Photo credit: ©istockphoto.com/nito100 |
Go on. Flip over the calendar. Look at that! You’ve made it to 2014.
Some of you are celebrating this past year with a bottle of bubbly, a victory lap around the shop and a hearty pat on the back (and maybe year-end bonuses) for your team. Others of you may still be saying: “Whew! Thank goodness that year is over. This year will be different. I know we can succeed. We just need to work harder, with more calls, during more hours, on more days of the week.”
If you’re in the second group, we’ll start working up your plans in a later column.
Right now, I’m talking to all of you. Whether last year missed, met or exceeded your expectations, now is the perfect time to focus on your business fundamentals. Without a strong foundation of business fundamentals, the success of your business can be out of your control and more heavily impacted by external forces — such as the economy, insurance rates, taxes, etc.
I know, you’re probably thinking: “But Bone, the economy’s recovering. Sales are good. I can breathe now.” OK, let’s take a look at that thinking.
First, you’d be right, for now the economy seems to be recovering. The gross domestic product continues to plug along at 1% to 2% annual growth rate. Some experts will estimate our industry is growing even faster, as much as 6% to 7% annually. So, no matter how you operated in 2013, your sales probably were good. So for this year, you’d be right again. If you don’t change anything, your sales will probably be good again.
But sustainable growth doesn’t come through good sales alone, especially when they are driven by external forces, such as a strong industry growth rate. Sustainable growth requires you to focus on all the lines below revenue. Look a little further down the spreadsheet. Were those good sales profitable or did you spend your salary to get them? Were you staffed appropriately to maximize sales opportunities or did you turn sales away? Did you manage your fleet expenses the way you expected? Do you have cash to fund additional sales growth? Did you train your techs?
All these questions need attention, so get your pencils out and start running your numbers.
The fundamentals
To support your efforts, here are three areas where I’ll focus my columns this year. You’ve heard me talk about them all before, but each one bears repeating.
• The right price. We continue to face an uphill battle when it comes to re-educating ourselves and our customers on the value of the services we provide. I’m sure if asked, customers would agree plumbers and technicians should earn a good wage, with benefits, retirement and the opportunity to support their families.
I’m sure our employees also appreciate driving trucks that don’t breakdown, using tools that actually help them do their jobs and working in a safe, comfortable environment. The challenge is to convince both of these groups that in order to afford those things, we must calculate them into the price of service.
Pricing your services at a breakeven point, or below, will guarantee quick results. Unfortunately, they will quickly result in you going out of business.
It’s up to us to set the right price, go to market with that price and train our employees to deliver the value for our price. Without training your employees and getting their buy in on why you charge the price you charge, they may not see the value for themselves and will have a hard time providing that value to your customers. Don’t let consumer assumptions or other businesses tell you what price to charge. It’s your business. It’s your price. Own it.
• Make a profit. You are a business. Merriam-Webster defines it this way:
busi·ness
noun, often attributive \?biz-n?s, -n?z, Southern also ?bid-\
: the activity of making, buying, or selling goods or providing services in exchange for money.
The key phrase is “in exchange for money.” It’s time to analyze your results. Did you make money? Did you miss big on one or two lines? Did you miss just a little on a number of lines? The problem with the good sales we talked about earlier is that when sales are good, we are tempted to take our eye off the ball and overlook the misses.
You or someone in your company needs to be focused on each line item on the income statement. If it’s not you, then assign it to someone in your organization who can directly impact that item.
Don’t just assume the shortfall in gross profit dollars in the first quarter will work itself out with more sales in the second quarter. You need to evaluate the problem, identify if it’s a one-time or recurring issue, and then assign someone to plan and execute a strategy to recoup that money. Again, “in exchange for money” is the key phrase.
• Why cash is still king. When I’m driving on the freeway, I prefer the center lane. It gives me the smoothest route and helps me keep my options open. If you’re a business and you have no cash, it’s like being stuck in the right-hand lane. You are being passed on the left by motorists who have more speed, and you are constantly yielding and breaking for those entering the freeway.
Cash lets you keep your options open, grow your business at the speed you choose and not yield for other businesses to enter your market.
Not only can cash help you grow your business, it also provides the personal wealth you went into business to achieve in the first place. If what you want is to earn a good income and retire at 67, you can achieve that working for someone else. It would be a lot simpler and I guarantee you would get more sleep.
But more than likely that isn’t you. You’ve probably worked for people before and realized sooner or later there was a better way — your way. Don’t stop short of realizing the full potential of your business.
So yes, while it may be a new year, the focus stays the same. With good leadership, solid training and accountability in place, no matter what happens in 2014, you will operate in a rock-solid state. Stay focused and keep smiling.
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