Archives for September 2021

What Percentage of Companies Fail Each Year?

By Tom Grandy, Founder

What percentage of companies fail each year and why?  Well, that depends on whose statistics you read.  If you check out the Internet there are as many opinions as there are organizations.  According to data from the Bureau of Labor Statistics approximately 20% of all businesses fail within the first year. By the end of the second year, 30% of businesses will have failed. By the end of the fifth year, about half will have failed. And by the end of a decade, only 30% of businesses will remain — a 70% failure rate.

The actual percentages may vary but the bottom line is that there are a lot of companies that fail each year.  The question is why?

Perhaps looking at franchises may just give us a few clues.  Statistically, 97% of all franchises make it through their first year and 95% make it through their first five years.  What is the difference between a franchise verses the rest of us.  Let’s look:

  • Investment – Who owns most franchises? Right, rich people!  The total investment in a McDonald’s franchise is between $1,000,000 and $2,000,000.  Sure, there are some minor franchises out there for less but the nationally known ones require a huge investment.
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  • Training – Does the owner run the franchise? Not at McDonalds.  The managers are hired and are sent to McDonald’s University in Chicago for training.  Other franchises may not have their own University but they do have extensive training programs.
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  • Budgets – Before a franchise can be purchased, the potential owner needs to create a budget for at the least the first year and often for the first one to three years. Within that budget they are told what percentage should be spent on marketing, advertising, etc. When the budget is completed, the potential owner will have a clear picture of the costs of running the business as well as the potential profit, if goals are met.
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  • Accountability – Once the franchise is open the new owner will be required to submit monthly reports based on their budgets. It’s called accountability.  If profit goals are not met, the monthly review will pinpoint what areas need work.
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  • Cash Flow – Cash is king in any business. As a company grows, significant amounts of cash will be needed to fund growth.  In addition to the initial investment, a stated amount of “cash” must be available to cover everything from increased inventory to slow times during the year.  Each franchise has specific amounts of cash the new owners must have on hand BEFORE the doors are opened!

 

Now, think about the typical trades company:

  • Investment – The only investment needed to start a trades company is the willingness to work, a supplier willing to provide 30-day terms and enough cash or credit to buy a new or used vehicle and a few tools.
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  • Training – Training for the new company owner usually consists of their experience working for someone else…usually as a technician. Business training.  What is that?
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  • Budgets – Creating a budget is another way of saying “Count the cost”. Very few new trades company owners have ever created a budget, therefore have little idea of what it takes to run a company much less what profit might be expected.
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  • Accountability – About the only accountability most trades companies have is their spouse who might ask questions like; “How are we going to meet payroll this week?”, “Our supplier wants to put us on COD.” or “Dear, how are we going to pay the mortgage this month, we haven’t received a paycheck in three weeks!”.
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  • Cash Flow – Trades companies have huge needs for cash. Cash is needed to fund increasing inventory and receivables.  Cash is also needed to fund those slow times during the year, not to mention funding the increased costs of doing business as the company grows and expands.  How much “cash” does the typical trades company start out with?  Usually between zero and borrowed! 

Are there some things failing trades companies could learn from successful major franchises?  You bet there are.  Check out the fruit of each and then glean what makes sense to you in your situation.

Did you know that the most profitable trades companies are owned and run by people who understand the business side of their businesses and who may or may not understand the technical side?  If you are serious about learning the business side of your business, then I would strongly encourage to you to attend Grandy & Associates two-day Planning for Profit workshop.  It can be attended in person or through online, instructor- led training, whichever best meets your needs. 

Mastering Follow Up

By Patrick Chapman Grandy & Associates

In his book “Good to Great”, author Jim Collins makes it clear the distance from good to great is normally not that far for most organizations or individuals. It is however, a series of very specific, strategic steps that produce significant outcomes. That principle holds true when it comes to mastering follow up. Being strategic in this key area will put you at the top of your field. The missing ingredient for most companies to achieve higher sales percentages is developing a clear follow up process.

Here are the facts:

  • 48% of people in Sales admit they have no clear follow up plan.
  • 25% of businesses make no more than two follow up attempts, then they QUIT.
  • Only 1 in 8 ever consistently make more than three follow up attempts.

 

Webster defines “follow up” as:  pursuit in an effort to create further action.  In essence, it is the process of assisting the client through the decision-making process culminating in a definite decision.  An effective follow up strategy should include three groups. Those who did not purchase at your initial offering, those who have made a purchase, and those who said no.

Many sales professionals have no clear plan if the client does not purchase on the first appointment. Let’s say you have 500 appointments this year and you close 60% on the first appointment. That still leaves 200 clients that did not make a decision.  Why give away that volume of leads annually? Adding two additional follow up steps to those remaining 200 clients, provides you with 400 additional opportunities to close the deal.

What about the client who did make a purchase from you? Do you have a follow up plan for them? It is easy for clients to feel important to companies until the transaction is complete. Do you respond with the same urgency after the sale is complete as you did before? Make certain you reach out to your clients after the sale is complete. Doing a walk through after an installation job is a great first step.  Do you also do a six month or annual follow up to check in?  If you want loyal customers, they must continue to feel important after the sale is complete.

The most overlooked category is the buyer who told you NO. We assume that a no means no to everything else we offer. That is a grave mistake. Let’s say the purchase was for a new comfort system.  If your competitor closed the sale for a new system install, you certainly want to highlight the fact that your company has a team of highly skilled technicians who are ready to provide the factory recommended spring and fall maintenance to the system. At the very least you will want to provide the client with your company resume highlighting all of the other products and services that may be of interest in the future.  Always remember, a loss today may become a win in the future if you keep the door open.

Let’s conclude by looking at Follow Up Best Practices.

First, decide the answer to these important questions. Who will follow up? What will be the method of follow up?  When will the follow up take place?

Second, remember the golden rule of follow up:  Time kills deals!  For example, if you present an option to a client and they do not purchase, it is ideal to set a time for the follow up to take place before completing the appointment. You want the client to know their time is valuable and you want to honor that by setting a follow up time that will be convenient to them.  If you don’t do this, you may get the dreaded “I am too busy to talk now, try back later”. This can become an endless phone tag session or even worse the first step to losing touch with the customer.  Remove the awkward follow up by setting the follow up expectation in advance.

Third, never follow up without adding something of value. The more you add value with every interaction the more you show yourself to be an expert. For example, rather that call and say “Hey, just checking in”. Follow up and say “Hey, I was thinking of you today and I have some additional information to share about the system you are considering.  It really highlights many of the concerns you shared with me”.  Be strategic with what you share and your follow up will be much more effective.

Fourth, always leave a message. You want the client to know they are important to you and you very interested in earning their trust and their business. In addition to the sales professional, consider a team approach to follow up. This shows the client your company has an expert team at every level in the organization who stand ready to serve and assist with any questions they might have.

Use these suggestions to develop a clear follow up strategy today!

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