Archives for March 2019

by Tom Grandy

We are all familiar with the definition of insanity — doing the same thing over and over again while expecting different results. So the question is:  Do you have 30 years of experience, or one year of experience repeated 30 times? Wise, and I might add profitable, companies review past performance, make necessary and positive changes, and move forward.

2015 is now behind us and most reading this article should have a year-end Profit and Loss statement to review. Although profit is an important indicator of how a company is doing, there are many other areas that need to be reviewed, at least annually. Reviewing past performance, and making positive changes, will also have a dramatic positive impact on your bottom line. Let’s create a list of items to review.

Maintenance Agreements
When it comes to maintenance agreements here are a few things to check:

• Total number – Do you have more, or less, maintenance agreements in place now than a year ago? It doesn’t really matter if the number went up or down, the question is “Why?” and “What are you going to do about it?”
• Profitability – Are your maintenance agreements profitable? If the answer is no, what are you going to change for the coming year to correct the problem?
• Selling maintenance agreements – Did office staff or your technicians sell most of your agreements last year? How can each group be encouraged, or trained, to increase sales?

Debt
We talked about total indebtedness last month. Make a list of every dollar you owe. That includes payables, loans, lines of credit, supplier debt, back taxes owed, credit card debt, personal money the company owes you, etc. Total the dollars owed and see how it compares to what you owed last year. Is your total debt increasing or decreasing? This can be a powerful reality check.

Turnover
How long have your employees been with the company, and are they productive in their respective jobs? I love the way Dave Ramsey puts it: you need the right people on the bus AND each person needs to be in the right seat on the bus. Two questions to think about here:

• If there has been a lot of turnover the past year (office or field), the team needs to ask the question, why? If you are unaware of the source of the problem it’s difficult to fix.
• Are all office staff and techs productive in what they do? Relationships tend to mess up good business decisions. Translated, keeping unproductive employees will eventually hurt the entire company. Over the years I have found most everyone is really good at something. Keeping an unproductive person not only hurts the company, but it limits the potential of the individual. Sometimes the best thing you can do for an unproductive employee is to force them to move on to another position in another company, where their unique skills can be utilized.

Do You Have Meaningful Information to Make Decisions?
What information flows into your hands on a daily, weekly or monthly basis? Is the report, or information, helpful or is it wasting your time and others time? What new, productive, information would you like to receive this coming year?

Sales Closing Percentage
If you are not tracking the close rate for your sales people and/or yourself, you should be. Are your team’s closing percentages higher this year than last? Why, or why not?

Rewards Programs
What incentive programs are provided for your staff and field labor people? Employees tend to work more productively when specific goals are set and rewards are provided for outstanding performance. Remember rewards can come in forms other than money. What about time off, sent on a trip, tickets to a ball game, dinner out, etc. Be creative!

Training
What kind of training did you provide last year? This can be technical or customer service training for techs. What courses, seminars, webinars or conferences did you and/or your staff attend? Continuing education is important. Just being away for a few days can refresh the body as well as the spirit. What was productive in the past and, therefore, what are your plans for this year?

Systems
What is the status of documenting your systems? I am talking about physically writing out the steps for everything that takes place within your company (who answers phone and want should they say, how to process a credit card, paperwork trail when a job is sold, etc.). Have each individual document everything they are responsible for within their position. Why? One day they may be sick or absent for an extended time. Someone has to know how to do their job. This process will take months, if not years. Have you started this process and if so, what is the status?

Receivables
What did your total receivables look like this time last year verses now? If receivables are growing, find the source of the problem and correct it.

What Have You Done For Your Customers…Lately?
Your current customer base needs to be touched 4-5 times a year. Are you doing that and if not, what will need to change for the coming year?

Community Involvement
Company image within the community is important. What has the company done this past year to be involved within the community? Remember the community IS your current, and future, customer base. What plans do you have to get involved this coming year?

Changes in Marketing
Have you made any changes in your marketing strategy this past year? If so, are you seeing results? What needs to change this coming year?

You might want to consider having a team meeting to answer the above questions. Chances are new ideas will arise that will benefit everyone in the company. Reviewing past performance is important if it is used as a springboard for future positive changes. Remember, if you are not growing you are dying!

You are a parent and little Johnny is 9-years-old going on 14. Does Johnny know how to behave when he goes to a restaurant, movie or arrives at a friend’s house for the night? What about when he is home? Is he respectful, does he make his bed each day and/or keep his room in order? We all know that is the way Johnny “should” behave. But, does that just happen, or did it take years of training? Right, it took years of training and sometimes he still didn’t do what he is told.

When that happened, there were probably consequences. Johnny is punished in some form and told for the 27th time what is expected of him. Eventually, with consistent reinforcement of the family rules, Johnny grows up to become a mature young man, respectful of others. The end product was not achieved by simply hoping Johnny grew into a fine young man. It took years of setting rules, reinforcing those rules, and providing negative consequences when the rules were not followed. It also included plenty of positive reinforcement when he was doing a great job. It was a process based on the parent’s overall objectives.

Technicians, and for that matter all employees, are just like Johnny. Rules need to be created, recorded, explained, and reinforced in order for employees to meet the owner’s expectations. Things like filling out paperwork properly, understanding the dress code, and keeping trucks or desks clean. What are your policies on drugs and what are the consequences if a random drug test is failed? Do your employees understand the basics of what holidays they get, how vacation time is earned, and what exactly happens if they do not show up for work on time?

These things should be spelled out in black and white in the form of a written Company Policy Manual. Every employee must be required to read the manual and to sign off on the fact that that have read it, understand it, and agree to live by the company policies. The owner, like Johnny’s parents, must then provide consistent consequences if the rules outlined in the Company Policy Manual are not followed.

In today’s world, a detailed Company Policy Manual is a critical document. It is not only the basis for expected behavior as an employee but it also spells out the process of firing an employee. Again, like Johnny, your employees cannot be expected to conform to the company rules if they don’t know what they are.

by Dave Ramsey  (published with permission in the January 2015 newsletter)

One of the first steps to becoming a true EntreLeader is recognizing that your team members are your most valuable resource. The sky’s the limit with a good team, and a workplace environment where team members are happy and thrive professionally and personally doesn’t happen by accident.

Some small business owners have bought into the notion that developing that kind of atmosphere is impossible. But I can tell you from personal experience that it’s not only possible, it’s fun to create. The key is empowerment. Here are four steps that will help you create and mold a team that is not just willing, but eager, to share the dream and take your business to the next level.

Cast a vision
Let your team know often exactly where you want the organization to go. There will be changes in your vision from time to time, so keep your entire team updated as you make adjustments to the target. The Bible in Proverbs 29:18 begins, “Where there is no vision, the people perish” (KJV). This holds true for your business, too. Once your team knows where you’re going and what’s going on in other areas of the company, they’ll become excited about hitting – and exceeding – their goals.

Don’t micromanage
A micromanager is someone who doesn’t have the confidence in team members to release tasks or concepts to them, even when competency has been proven repeatedly. Remember, there is only one good time to micromanage, and that’s when they’re new to the team. After they’ve been trained and have proven their competency and integrity, it’s time to let them fly.

Expand and enhance skills
You’ll see an incredible ROI when you put time and money toward your team’s professional and personal growth. Try developing a mentorship program where team members can work closely with leaders to improve their skills. You might also offer “lunch and learn” classes, where guest speakers talk with your team during their lunch break.

Compliment them often
Everyone around you, from the janitorial staff to the highest-paid executive, wants to know they’re appreciated. Brag on them all every chance you get. Words of praise and recognition from the boss can put a big smile on the face of even the most world-weary professional. It will send confidence levels through the roof!

by Dave Ramsey (Published with permission in the December 2015 newsletter)

As a busy entrepreneur, you may feel things like resolutions are a waste of time. I mean, why bother? Statistics show that about 35 percent of all resolutions are broken before the end of January. An article in Forbes magazine indicated that only eight percent of those making resolutions stick to them and make them a reality.

We don’t mess with resolutions around my office. We set goals, both in our professional and private lives. I’m not talking about daydreaming or hoping and wishing for good things to happen. I mean serious forethought and putting pen to paper. Keep in mind, too, that goals should be specific, measurable and time sensitive. This is a vital part of the process, because the key to realizing your goals is avoiding a set-it-and-forget-it mentality.

Focused intensity and honesty
Trying to address several different issues at once is not just overwhelming, it’s self-defeating. Work on one goal at a time. Bring all your ideas and energy to the table, and you’ll be surprised at how quickly you can overcome bad habits or solve problems.
Once you reach a single goal, you’ll be motivated to take on new and greater challenges.

The Wheel of Life
Sometimes we all get caught up in the day-to-day aspects of life and business. But as uncomfortable as it may feel in the beginning, you must look toward the future to get a handle on the big picture.

Study the late Zig Ziglar’s Wheel of Life. It covers seven areas of improvement, including family, career, financial, social, intellectual, physical and spiritual. Spend time thinking about each as it pertains to your life. Then, reflect back on the past year and envision the next five to 10 years. It might blow your mind to think what your life could look like if you grew just a little in all these areas!

Plan to maintain
Spend some time now thinking about how you’ll maintain focus throughout the year. You might choose to revisit your goals weekly or monthly to evaluate your progress. If interpersonal accountability is more your thing, you can pair up with a friend or coworker who is intent on reaching their own personal goals.

You might even consider reducing your goal, or at least the essence of it, to one simple word you keep on display in a prominent location. Then, when there are decisions to be made or problems arise in that area, refer to that word and let it guide your actions.

Author Paul Tripp once wrote, “Every day we lay little bricks on the foundation of what our life will be. The bricks of words said, the bricks of actions taken, the bricks of little decisions, the bricks of little thoughts and the bricks of small-moment desires.”

As time passes, it’s the layers we add — if done with thoughtfulness, intention and determination — that will create a version of ourselves, our work and our lives that would be unattainable otherwise!

by Tom Grandy

I graduated from Virginia Tech in 1973 with an industrial engineering degree. The objective of an industrial engineer is to find ways to do things faster, more efficiently, and less expensively. A few years after graduating, I went to work for an aluminum smelter in Hawesville, KY, which was about 45 minutes from my home in Owensboro, KY. I eventually became responsible for half of the maintenance control department. Shortly after moving into that position, it was apparent that we had two parts warehouses. One was on-site, which made perfect sense. The other, however, was located in Owensboro, KY – a 45-minute drive from the plant. That location made no sense at all. If a needed part was housed in the Owensboro warehouse, it took someone three hours (at minimum) to get the part by the time they drove 45 minutes each way, searched the warehouse, loaded the part, and probably stopped for a quick lunch break somewhere along the way.

I thought to myself, “It doesn’t take an industrial engineer to realize housing parts 45 minutes from the plant site makes no sense.” Even though the warehouse had been there for many years, and no one seemed concerned about it, the idea of eliminating it rapidly moved to the top of my priority list. We could eliminate the warehouse, save thousands of dollars a year, and increase efficiency. To my way of thinking, management would probably be so thrilled with the new found savings they would undoubtedly recommend a handsome bonus.

I created the study, estimated the annual savings and prepared a beautiful, multi-page, report pointing out the benefit of eliminating the Owensboro warehouse while consolidating all parts on site. The return on investment was amazing. The company would save over $100,000 a year by eliminating the Owensboro facility, not to mention the labor and time savings of not having to travel to Owensboro several times a week to pick up parts.

The project was presented to my boss, but it seemed to generate very little interest. That didn’t stop me; I simply began a grass roots effort to gain support for the closure. However, the results were similar to my bosses. There was little interest. After pushing my money-saving project for several weeks, one of the department managers pulled me aside and said, “Tom, there is something you need to know about the Owensboro warehouse.” In a very quiet, but straightforward, voice he simply said, “Tom, the plant manager owns the Owensboro warehouse.” Wow, no one had explained it to me quite that way before! The project didn’t just move down my list of priorities, it was removed from the list all together.

A fresh perspective really can make a significant difference!

When it comes to debt, a fresh perspective can also make a huge difference. The accumulation of debt within a business doesn’t happen overnight. One day the company needs another service van, so naturally the company buys one which generates an additional payment of $675/month. Sure, the company is still paying for the last van it purchased at $775/month, but hey, it will be paid off in another five years. Then there was the owner’s vehicle. Perhaps the owner should not have purchased that new $60,000 vehicle, but he spends a lot of time in his truck and works a lot of hours, so the least the company can do is buy him a nice truck.

Sometimes inventory runs low, and the company needs to purchase $10,000 worth of parts. No problem, we will simply “borrow” $10,000 on our line of credit. We can pay it back as soon as we win the bid on that huge project. Before long another emergency comes up, and another, until our line of credit grows to $75,000 and we are maxed out.

Now we owe Uncle Sam $35,000 in taxes, which we didn’t see coming. It gets expensive when we don’t pay Uncle Sam, so we will simply max out two more credit cards to pay the bill. Oh, and that darn weather. We were hoping for an outstanding season (depending on the trade) to get all that debt paid off, but the weather just did not cooperate and sales were actually less than the same season last year. No big deal; our suppliers will understand that we will be a bit late paying our bill. Before long our supplier debt has increased to $85,000 and the company finds itself on COD.

In less than three years, the company now finds itself in a lot of debt, as summarized below.

• Van #1 ($775/month x 12 months): $9,300/year
• Service van ($675/month x 12 months): $8,100
• Owners vehicle $710/month x 12 months): $8,520
• Pay Line of Credit Off in Five Years ($75,000 divided by 60 months, with some interest = $1,500/month): $18,000
• Two Credit Cards to pay off tax bill ($35,000 / 60 months at 18% = $950/month): $11,400
• Pay Off Suppliers $85,000 over 60 months, with interest, would be about $1,700/month: $20,400

Total Debt Payment/Year = $ 75,720

To state it another way, the company is in debt $350,000 to $400,000.

Those little bumps in the road didn’t seem all that big until it was all summarized in one place.

Debt can, and will, eat your lunch! Let’s project getting totally out of debt within 5 years. That will give us a number we can work with. We will assume the two van payments, and owners vehicle will each be paid off in 5 years.

I want to suggest several things:

Summarize All Your Debt – Make a physical list of all your debts. Simply seeing your total indebtedness in black and white can, and should, be an eye opener.

Create A “Specific” Repayment Plan – Take a look at each individual debt and make a specific plan to pay it off. Plan on paying off loans early. For distributors, taxes or lines of credit determine how quickly you want it paid off. If its five years divide the total debt by 5 years, throw in some interest, and add it to your overhead.

Catch A Vision Of What Being Debt Free Would Look Like – Seeing light at the end of the tunnel can be very energizing. If the sample company above could stick to their five year plan they would have all $350,000 to $400,000 paid off. However, the best part is that $75,000+ of debt repayments, currently in the budget, would no longer exist which means the $75,000 will become additional profit. What could you, or your company, do with an additional $75,000 each year!

Build Debt Repayment Into Your Pricing – Wanting to get out of debt won’t make it happen. The cost of debt repayment is just like rent, utilities or insurance. It is a cost of doing business that can, and should, be paid by the customer, in the form of your pricing. Now think for a minute. What will happen when you build the additional $75,000 into your pricing? Your pricing will go up. Paying off debt with existing pricing almost never works. To eliminate debt, your pricing must go up!

Stop Borrowing – Lastly, learn from your experience. You worked hard for five full years to get out of debt. Make a commitment to stay debt free. Holding back your new found $75,000 for even two years would create a saving account of $150,000. Use that money to make additional purchases rather than borrowing!

Ignoring debt has the ability to put you out of business. Make a plan to become debt free, stick with it, and enjoy the fruit of your labor.

Sometimes a picture really is worth a thousand words. Several years ago we had our basement waterproofed prior to having it remodeled. The winning contractor’s presentation was a bit unique. He showed me the mechanics, with pictures, of how they were going to accomplish the task. The first photo showed a technician jack hammering the cement floor about 12 inches from the wall. He explained how they were going to remove the floor, put in a channel, pour cement over it and literally force my basement to leak. The channel was going to lead to a newly installed sump pump that would then pump the water safely outside the house. He showed me pictures of each step.

The contractor also showed me pictures of his techs placing the cement and mud into buckets that were handed to a second tech outside the basement window plus pictures of all necessary materials coming through the basement window. He explained how important it was to not track dirt through my home. My wife liked that a lot! He also offered a lifetime waterproofing certificate on the house that not only covered our ownership but included future owners, as well.

The pictures he showed me literally helped me understand the waterproofing process while, at the same time, justifying his eventual price. The pictures told the story and the contract was signed.

What may seem like a simple, easy-to-understand installation process to you is not necessarily the case with your customer. If you “show” them the process, it can often be the difference between finalizing the sale or not! As you show the potential customer how you are going to do the work, be sure to spend a few extra minutes to explain how your installation is unique among contractors that do similar work. Like my basement contractor, the photos might just tip the scale in your favor when the final decision is made.

Making a great presentation, and selling the job, is great.  However, the real question is “Was the job priced correctly?”  The best way to be 100% confident you are priced correctly is to model your company, by department, on our Labor Pricing for a Profit software.  Keep in mind the most profitable companies within the trades industry are run by owners who understand the numbers.  Modeling your company can be a tremendous aid in terms of setting the stage for profitable growth in the future.