Archives for March 2019

By Dave Ramsey

*Published with permission in the November, 2015 newsletter*

One of the most important things you can do as a leader is to take time to grow. Running a business can leave little time for anything else, but, believe me, when it comes to your professional life, it’s always worth the investment.

Hire thoroughbreds
One of the easiest ways to do this is to surround yourself with winners. We call them thoroughbreds at my office. Taking extra time and doing your due diligence in the hiring process is a great way to ensure that you’re hanging out every day with people who can help you grow. You’ll become more astute as a business person and become a better human being just from hanging out and working with quality people day-to-day.

Seek out experts
Spending time with the best of the best may not be as difficult as you think. Many of the top minds in business regularly host live events and write books. Did you know that the average millionaire reads one or more non-fiction books a month? Learning from the best and brightest will open new doors, generate ideas and show you what you’re doing well and where you can improve.

Connect with peers
Living in a technology-driven world, it’s often easy to forget that the best relationships are made when people talk to each other face-to-face. So, get out of the office and meet people! Don’t make the mistake of being the person who is constantly trying to sell themselves or their company. The objective here is to meet people and gain knowledge and insight. Plus, you’ll make lots of new friends along the way who actually get you.

Leaders need mentors, too
Finding a mentor probably isn’t as difficult as you think. In fact, most successful people are flattered by such a request and happy to help others. You’re not going to be able to simply call up Bill Gates or Warren Buffet on the phone, but that’s okay. All you’re looking for is someone you respect and admire, who is bit ahead of you in terms of experience and development. You may even find that you need different mentors for different areas of your life.

We host numerous EntreLeadership events each year. In them, we teach small business owners the principles we used to grow our company. Yes, growth is that important to me. It should be to you, too. It’s one of the simplest and most gratifying things you can do to become a better leader and win the race!

Playing the “what if” game for your business can be very revealing … and very profitable. “What if” we raised our prices? “What if” we added another tech? “What if” we upgraded our maintenance agreement plans?

Before considering playing the game, it would be helpful to fully understand the three main reasons most trades companies go out of business.

1. Improper Labor Pricing – The number one killer of small businesses involves not understanding how much the company needs to charge, in each department, to cover costs while generating a reasonable profit.

2. Poor Cash Flow Management – Even if a company is priced properly, in each department, it can still go out of business because of cash flow issues. Most trades companies are highly seasonable, with the end result being 2-4 months a year where the company loses money. The company may be profitable for the entire year, but if it can’t cover short-term cash flow needs it can easily go out of business before those profitable months kick in.

3. One Department Subsidizing Another – This is often a major issue with older companies that offer several products and/or services. Very few companies — less than five percent – break their costs out, by department, all the way through the P/L including fixed and variable overhead. Again, the end result is predictable. One department ends up subsidizing another one and no one knows it until it’s too late!

The first step in avoiding all three of the above potential pitfalls is to model your company, by department. Have you ever tried playing checkers without a checkerboard? It can be done, but it’s a lot easier if you have the game tucked away in your family room closet. Well, you can model your company manually by department, but it’s a lot easier to play the “what if” game if you have intuitive software to help you do it (such as Grandy & Associates industry-acclaimed modeling software program, Labor Pricing for a Profit with Cash Flow Projections!). To save time, let’s assume you have created a month-by-month, department-by-department cash flow budget either manually, or using modeling software.

You have entered the equipment replacement costs, direct and indirect labor, fixed and variable overhead, and materials, all by department. When completed, you will instantly know which departments are making money and which are not. You will also know if the overall company is making money and what your projected month-by-month cash flow looks like. This is not a simple process to complete but it can be very revealing.

When the initial model has been completed, the real fun begins. Now it’s time to begin the “what if” process of changing things (add a tech, change an overhead cost, buy another piece of equipment, increase your material mark ups, etc.) to see how the proposed changes will affect your hourly rate, cash flow and overall profitability.

This process can pinpoint problems while clearly showing the company owner what changes need to be made to ensure future profitability. I want to share the summary results of three companies I have worked with over the past several months to illustrate how it works.

Company A
This company did about $1,500,000 in gross sales. Roughly a million dollars was generated by the commercial division, with the remaining dollars being generated by residential service (which, by the way, was on time and material pricing). The commercial division had a projected net profit of about $20,000, while the service division was generating about $35,000 in net profit. The “what if” involved totally eliminating the commercial division, shifting fixed overhead to service, and adopting flat-rate pricing within the service departments. In order for service to absorb the extra overhead, and generate a reasonable profit, the hourly rate needed to be raised by $30/hour. An increase of $30/hour will not even be noticed by the customer if you are on flat-rate pricing. Increasing the service hourly rate by about $30/hour and eliminating the commercial division resulted in nearly doubling the company’s overall net profit! Bingo, doing a few “what if” scenarios clarified the needed changes to increase profitability while eliminating the normal headaches of commercial work along with its resulting cash flow issues.

Company B
This $24,000,000 company had a $12,000,000 mechanical division and a $12,000,000 service division at two physical locations. When the initial model was completed, it revealed a loss of about $188,000 in the mechanical division. The first “what if” reduced the mechanical division, and corresponding overhead, by about $4,000,000 in gross sales. The loss in the mechanical division increased to about a half million dollars. That was not the answer. The second “what if” eliminated all mechanical work, and accompanying overhead, at the second location. That model revealed a loss of roughly $750,000. That was not a good option either. The finial model eliminated the entire mechanical division including support staff, techs and relevant fixed and variable overhead. That was a winner. Company gross sales were cut in half down to $12,000,000 BUT the resulting overall net profit was $2,500,000. Again, the “what if” clearly defined the direction the company needed to go.

Company C
This company grossed a little less than $2,000,000 and had two locations about 200 miles apart with nearly all support staff, in terms of paperwork, in one location. The company had four divisions with the initial model yielding roughly a break-even situation overall. However, since the company was modeled by department, it became obvious which departments were losing money and which were extremely profitable. The overall game plan involved keeping all departments, including the ones losing money. However, two things became apparent during the “what if” process in terms of the departments that were losing money. First, closing those departments altogether would only make things worse, since much of the fixed overhead would remain and would have to be moved to profitable departments, which could not support the increased overhead. Secondly, if small changes could be made in terms of increasing gross sales and improving productivity while making slight increases in pricing, the losing departments could become profitable within the next 6-12 months.

One department, at the second location, proved to be much more profitable, once the company was split into departments. The game plan at that location became obvious – grow the profitable department as fast as possible. The game plan to create growth was put into place. Assuming the overall objectives are accomplished, the company should become very profitable within the next year. Bingo, modeling the company, and doing the “what if” revealed a clear path toward profitability.

The most profitable companies within the trades industry are run by owners who understand the numbers. Modeling your company, either manually or using software, can be a tremendous aid in terms of setting the stage for profitable growth in the future.

This month we are pleased to feature one of our fellow distributors and guest blogger DTS International from Syndey, Australia with a great post on the different communication Styles. We talk about DISC in our Team Solutions line of products but this post puts a face to the four communication styles.

We are often asked by the people we work with for examples of famous movie characters as well as real life people and how they fit in the DISC framework. We have broken the post into three parts. In the first part of the post we have put together a collection of characters who might represent each of the behavioural styles. The second part of the post is a list of famous Australian’s, who we might guess their behavioural style (based on their public face at least). And the third part of the post is examples from other parts of the world.

Star Wars: 

The Simpsons: 

The Lord of the Rings: 

Toy Story: 

Shrek: 

A Few Good Men: 

The Fifth Element: 

Batman Returns: 

Sister Act: 

 

I would like to thank DTS International for this creative look the different communiciation Styles.

*Published with permission in the October, 2015 Newsletter*

One of the most popular small business questions I receive on a regular basis might surprise you. It goes something like this: How do you run a successful company without it completely taking over and ruining your life?

The average small business owner works more than 60 hours a week. And no matter how much you love your job, those hours over a long period of time, will begin to take a toll. Pretty soon your family, your health and the company itself will begin to suffer.

Before I began to study the principles of time management, I thought the whole idea was some kind of slick, money-making scheme hatched by a know-it-all who had never really worked for a living. But a funny thing happened. As I applied some simple time management principles to my life, I began to get more accomplished. In addition, I wasn’t as tired mentally and physically as I was before. I was on-task, efficient and I had more energy — even at the end of the day!

Most entrepreneurs are hard-charging, bust through and get-it-done types of people. The last thing we need is to feel like a rat in a wheel, just running and running but never getting anywhere. To enjoy our work, we must have a plan and a sense of traction and accomplishment. My friend John Maxwell says a budget is telling your money where to go. Well, the same principle can be applied to your time. You can plan ahead and tell it where to go, or you can scratch your head and wonder where it went.

Years ago, I never viewed time management for the purpose of productivity as something with personal or spiritual implications. Then, I was told that today’s system of minutes and seconds was developed by 14th Century monks, who were also mathematicians. They were able to formulate calculations breaking hours into minutes and minutes into seconds. Before that, time was measured only in hours using instruments like a sundial. The monks did this work with the purpose of gaining the ability to more precisely worship God.

Managing time and money well, and viewing them as precious commodities, should be a normal exercise in both our professional and personal lives.

Perception is often reality, at least in the eye of your customer. Two things instantly tell the customer how skilled the technician is. The first is appearance. Arriving in a clean uniform, with no visible body art, is a huge plus. The second thing is how neat the work area is when the tech finishes the job. Those two things significantly impact your customer’s perception of value. If the area is at least as clean as it was when the tech arrived, it instantly tells the customer, “If the tech was that neat and respectful of my home, he or she MUST do great quality work!”

Now are the techs appearance and a clean work area really a measure of their technical ability? Of course not. However, perception is often reality in the eye of the customer.

Guess what else makes an instant impression? The external appearance of your vehicle screams about the quality of work a company offers. Again, is that fair? The answer is a resounding no. But it DOES make a lasting impression on the customer.

My wife and I were taking our normal early morning walk down the main street of our town when this rumbling sound reached our ears. When we turned to look, we noticed the sound was followed by a cloud of smoke. It wasn’t long before the vehicle pulled up next to us. It was old, the paint was fading, and it had numerous dents from fender to fender. The sign on the driver’s door, or at least the part that could still be read, proudly displayed the name of the contracting company along with its phone number. Without my saying a word my wife turned to me and said, “I would never use that company. If they can’t take care of their vehicles, I seriously doubt they do quality work.” Wow, talk about a classic example of a poor first impression.

By the way, the reverse is also true. Take a look at the vehicle pictured with this article. What instantly comes to your mind when you glance at the van? “Great looking van, so the company MUST do quality work, right?” Well guess what, they do! Niteliters originally installed our landscape lighting years ago. Being a progressive (and wise) company, they soon offered quarterly maintenance agreements. We signed up, and each quarter they clear away the trash, adjust the lights, change the timer when Daylight Savings time starts and ends, and they replace burned out bulbs. Talk about hassle free; we love it.

So let’s go back to our original point. Perception “is” reality, at least in the eye of the customer. Ask yourself this question: What are my vehicles saying to my current, and perhaps more importantly, future customers? Guess what, a picture really is worth a thousand words.

This is a true story of how the car radio began. It’s also a story of perseverance in following your dream. Let this story encourage you, as it did me, to move forward no matter how tough the circumstances may be.

One evening, in 1929, two young men named William Lear and Elmer Wavering drove their girlfriends to a lookout point high above the Mississippi River town of  Quincy, Illinois to watch the sunset. It was a romantic night to be sure, But one of the women observed that it would be even nicer if they could listen to music in the car. Lear and Wavering liked the idea. Both men had tinkered with radios (Lear served as a radio operator in the U.S. Navy during World War I) and it wasn’t long before they were taking apart a home radio and trying to get it to work in a car.

It wasn’t easy since automobiles have ignition switches, generators, spark plugs, and other electrical equipment that generates noisy static interference. It made it nearly impossible to listen to the radio when the engine was running.

One by one, Lear and Wavering identified and eliminated each source of electrical interference. When they finally got their radio to work, they took it to a radio convention in Chicago.

There they met Paul Galvin, owner of Galvin Manufacturing Corporation. He made a product called a “battery eliminator,” a device that allowed battery-powered radios to run on household AC current. But as more homes were wired for electricity, more radio manufacturers made AC-powered radios.

Galvin needed a new product to manufacture. When he met Lear and Wavering at the radio convention, he found it. He believed that mass-produced, affordable car radios had the potential to become a huge business. Lear and Wavering set up shop in Galvin’s factory, and when they perfected their first radio, they installed it in his Studebaker. Galvin then went to a local banker to apply for a loan. Thinking it might sweeten the deal, he had his men install a radio in the banker’s Packard. Good idea, but it didn’t work. Half an hour after the installation, the banker’s Packard caught on fire.

Needless to say, they didn’t get the loan.

Galvin didn’t give up. He drove his Studebaker nearly 800 miles to Atlantic City to show off the radio at the 1930 Radio Manufacturers Association convention. Too broke to afford a booth, he parked the car outside the convention hall and cranked up the radio so that passing conventioneers could hear it. That idea worked — he got enough orders to put the radio into production.

What’s in a Name?
That first production model was called the 5T71. Galvin decided he needed to come up with something a little catchier. In those days, many companies in the phonograph and radio industry used the suffix “ola” for their names – Radiola, Columbiola, and Victrola were three of the biggest. Galvin decided to do the same thing. Since his radio was intended for use in a motor vehicle, he decided to call it the Motorola; but even with the name change, the radio still had problems.

When Motorola went on sale in 1930, it cost about $110 uninstalled, at a time when you could buy a brand-new car for $650, and the country was sliding into the Great Depression. (By that measure, a radio for a new car would cost about $3,000 today.) In 1930, it took two men several days to install a car radio. The dashboard had to be taken apart so the receiver and a single speaker could be installed, and the ceiling had to be cut open to install the antenna. These early radios ran on their own batteries, not on the car battery, so holes had to be cut into the floorboard to accommodate them. The installation manual had eight complete diagrams and 28 pages of instructions.

Selling complicated car radios that cost 20 percent of the price of a brand-new car wouldn’t have been easy in the best of times, let alone during the Great Depression.

Galvin lost money in 1930 and struggled for a couple of years after that. But things picked up in 1933 when Ford began offering Motorola’s pre-installed at the factory. In 1934 they got another boost when Galvin struck a deal with the B.F. Goodrich tire company to sell and install them in its chain of tire stores. By then the price of the radio, with installation included, had dropped to $55. The Motorola car radio was off and running. The name of the company was officially changed from Galvin Manufacturing to “Motorola” in 1947.

In the meantime, Galvin continued to develop new uses for car radios. In 1936, the same year that it introduced push-button tuning; it also introduced the Motorola Police Cruiser, a standard car radio that was factory pre-set to a single frequency to pick up police broadcasts.

In 1940 he developed the first handheld two-way radio, The Handy-Talkie, for the U. S. Army. A lot of the communications technologies that we take for granted today were born in Motorola labs in the years that followed World War II. In 1947 they came out with the first television for under $200. In 1956 the company introduced the world’s first pager. In 1969 came the radio and television equipment that was used to televise Neil Armstrong’s first steps on the Moon. In 1973 it invented the world’s first handheld cellular phone.

Today Motorola is one of the largest cell phone manufactures in the world and it all started with the car radio.

What Happened to the Two Men Who installed the First Radio in Paul Galvin’s Car?
Elmer Wavering and William Lear ended up taking very different paths in life. Wavering stayed with Motorola. In the 1950s he helped change the automobile experience again when he developed the first automotive alternator, replacing inefficient and unreliable generators. The invention lead to such luxuries as power windows, power seats, and, eventually, air conditioning. Lear also continued inventing. He holds more than 150 patents. Remember eight-track tape players? Lear invented that. But what he’s really famous for are his contributions to the field of aviation. He invented radio direction finders for planes, aided in the invention of the autopilot, designed the first fully automatic aircraft landing system, and in 1963 introduced his most famous invention of all, the Lear Jet, the world’s first mass-produced, affordable business jet. Not bad for a guy who dropped out of school after the eighth grade.

Sometimes it is fun to find out how some of the many things that we take for granted actually came into being….and it all started with a woman’s suggestion. Imagine that!

As Paul Harvey says, “And that’s the rest of the story.”

Why share the history of the radio? Because it a reminder not to quit. Follow your dream with full perseverance. You just might become famous within your industry.