Lori Stuckert

The Customer is NOT Paying For Your Time

By Tom Grandy, Founder

When is the best time for a tooth to break off?  Friday dinner was certainly not my first choice.  The good news was that I was not in any pain.  The following Tuesday I had an appointment with my dentist.  Our dentist is amazing but very expensive.  Over the years I am confident we have bought him at least a late model used car for one of his kids! 

My appointment was at 10:30 AM to look at my broken tooth.  The dentist then suggested we cap it today if I had the time.  I did have time and he proceeded to take an x-ray of my tooth.  His comment was quite insightful.  “We don’t want to put a roof on the house if the basement is on fire.”  Translated, is the tooth solid with no decay?  It was, so the process began.

He videoed my entire mouth which ended up on the computer screen right next to me.  He then used his 36 years of training to customize my tooth until it fit perfectly in shape and size.  A pin was installed in the middle of my existing tooth for added strength to bond the cap. Once the shaping and fitting process was completed the image was sent to a lathe with a block of material somewhat like porcelain but harder.  It took about 30 minutes to “create” the new cap, followed by another 30 minutes of “hardening process”, raising the temperature to 1,800 degrees to harden the cap. 

The next step was to color match the new cap to the rest of my teeth.  He would gradually darken the new cap with each step getting closer to the perfect color.  Once perfected the final fitting process began.  The cap was placed in my mouth, taken out and sanded, then refit.  After perhaps a dozen trips in and out of my mouth it felt fine.

The dentist then placed the new cap on and handed me a mirror, before permanently cementing it in place.  He asked me what I thought of the color match.  It looked perfect to me but to him it wasn’t quite right.  He offered to make a totally new cap at no expense to me.  However, I thought it looked great, so he permanently placed the cap in my mouth.

Two hours later I walked out the door after having paid the bill.  By the way, they offered a 5% discount if payment was made on the day of service…which I took advantage of.

Was it expensive? Absolutely!  It was nearly $1,600 after the discount.  Was I a happy camper? Yes indeed!

I wasn’t paying $1,600 for his two hours of time.  I was paying for his 36 years of experience, the huge investment he had made in technology, and the countless hours of training. 

So, what’s the point?  The point is to stop focusing on the hourly rate you are charging the customer.  Help the customer understand the value of the job.  Explain how you are unique, able to solve their problem better than any other company in town.  If five companies can all do the same exact job, then price becomes the issue.  However, if your company can be presented as “unique” it is no longer about price.  Unique solutions demand higher prices and should!

How much was it worth to me to spend two hours in my dentist office and walk out with a new tooth?  To me it was priceless.

Do your employees know the company policy on vacations, drug testing, tardiness, sick pay, health insurance, etc.?  If not, it’s time to create a Company Policy Manual.  The good news is that Grandy & Associates has developed a 96-page Company Policy Manual.  It is in Microsoft Word so you can add, delete, or modify at will.  The normal cost is $134.95 but this month only it’s only $99.95.  Order today.  Not happy.  Return for a full refund, no questions asked.

When Should I Start My Succession Plan?

By Glen Herman, Creative Business Services

This is a common question that I get asked as a business broker.  The short answer is, as soon as practical.  The more time you devote to planning your exit, the more value you will likely realize.  A three-year or five-year timeline is a good bet to maximize value, because it allows you to identify unresolved opportunities (problems), further develop and document processes, evaluate internal talent, and structure for the transfer of ownership. 

The first step in the process is choosing a successor.  For some companies, there may be an internal successor.  This may be a key employee or family member.  For other companies, this may be an external successor.   In either case, you will need a valuation of your business by a qualified and certified valuation specialist.  While your CPA is a good start, they will likely not have the same experience and knowledge of the competitive market as it relates to the sale of your business.  There is no substitute for a knowledgeable business brokerage firm with a certified business valuation specialist.  They have the financial background, but also an understanding and ability to consider not only the financials but the goodwill associated with your business.  The value of goodwill should not be underestimated.  With the current labor shortages many companies are facing a strong, well-trained workforce adds a great deal of goodwill value to a sale. 

Once a potential successor is identified, you need to go about the work of verifying their fitness for the role.  This is obviously more important with an internal successor.  If an external successor is part of the plan, the fitness is likely to be related more to cultural fit than anything.  Every company has a culture.  Some good, some not so good.  There is always a culture.  When a buyer is looking at purchasing a company, culture is a key consideration.  More importantly, the behaviors that shape the culture will be looked at.  Identifying the attributes of key employees and your workforce in general on your terms is the best way to set the stage for a smooth transition.  If you have an internal successor, have a complete personality profile on them.  You will be able to identify any potential concerns that can be corrected or bring to light the possibility that you chose your successor poorly.  If you are on a three-year or five-year timeline, you will plenty of time to switch directions regarding successors if you have done comprehensive profiling. 

You might be asking why a business broker recommends these things…right?

Well, quite simply, a business that has a structure and process for improvement is of higher value than one that does not use processes and systems.  Buyers are looking for businesses that allow them to “work on” not “work in” the business.   In terms of success, a systems-oriented business is more likely to be successful.  Successful businesses sell for higher values.

If you have any questions regarding the sale of your business, please call or email me today!

Glen Herman   |   Business Intermediary

Creative Business Services / CBS-Global LLC

Business Brokerage | Mergers & Acquisitions | Consulting
p 262.719.2270

Communication Is The Key To Profitability

By Tom Grandy, Founder

I woke up excited this morning!  Our hot water heater had failed, and we were scheduled as the first call of the day to have it replaced.  I was excited because each service call creates an opportunity for another up close and personal article.  I was not disappointed. 

Let’s go back a couple days.  Our 50-gallon water heater is 23 years old but has been running perfectly.  Saturday the hot water turned to cold, ouch!  We boiled some water over the weekend until I could call our long-time plumbing company Monday morning. I was told a tech would be sent out to “evaluate” the situation.  I told the operator it 23 years old and I knew we wanted to replace it.  They sent out a technician anyway. 

The tech was one of the politest and most informative individuals we had ever dealt with.  As he checked things out, he found the burner was working perfectly and in fact we now had hot water!  We had not tired the hot water again since Saturday.  He then proceeded to explain how the “old” water heaters were much better than the new ones.  He noted there was no visible rust, and in his opinion, it may last us many more years.

My wife and I discussed the situation, and the final decision was to replace it anyway.  The tech wrote down the details and it was scheduled for this morning (Tuesday) as the first call.

The company opens at 8:00.  The crew had not shown up at 9:30 so I called to check on things.  I was told the two techs were on their way but needed to go by the distributor to pick up the 50-gallon water heater.  Although this company still refuses to go to flat rate pricing they do fortunately, have a firm price for replacing hot water heaters.  The extra pick-up time wasn’t costing me anything so I was only mildly concerned they were late.

Teaching Point #1:

The company knew the day before (in the morning when the tech left our house) what was going to be installed.  Would it not make perfect sense to check the inventory in the company warehouse to see if one was in stock?  If the tank was not in stock, which it wasn’t, there was plenty of time go pick one up so they would be ready to roll at 8:05 AM the next day.  No, they “realized” there was not one in stock this morning and had to go to the wholesaler to pick one up.  The techs (yes two) showed up about 9:45 AM.  That is nearly two hours of non-billable time, each, wasted!

As I noted, the techs had now arrived.  They went to our basement where the water heater was and instantly noted the ticket the young man had made out the day listed the new shutoff value but failed to note the value that needed to be replaced for the humidifier.  I was then told by the lead tech that at some point they would have to return to the shop and pick one up.

About two hours later, the tank was “slowly” draining.  I suggested that this might be a good time go back to the shop to pick up the needed value.  They agreed it was a good idea and off they went.  Forty-five minutes later they returned with the valve.   

Teaching Point #2:

The tech from the day before was aware of the need for both valves because he told me.  However, he failed to write it down on the ticket.  Let’s see.  Two techs at forty-five minutes equals another 1.5 hours of non-billable time.  The point…be sure to write down everything that will be needed on the job. 

The rest of the day proceeded nicely.  Mats were spread from the back door through the basement.  Booties were worn.  The lead tech was very personal and informative.  He even replaced a couple gas lines that he was simply uncomfortable with.  They didn’t make a mess and everything functioned perfectly before they left.

The problems were not with the two techs that did the work.  They were great.  The problems were in communicating properly on the paperwork and checking inventory so the team was ready to roll the next morning.  Proper communication would have saved the company five to six non-billable hours.  Even if the company only charged $100/hour that is $500-$600 of non-billable time.  That doesn’t even account or lost income had those hours been available to bill to another customer. 

Proper communication really is the key to profitability.

Side note:  we found out that the initial tech that came out and recommended we keep the old hot water heater was actually an HVAC tech!  When the two plumbing techs took the old tank out and put it in their truck, they told me (not knowing what the tech had said the day before) that nearly a shovel full of rust fell out of the bottom of the tank and they seriously doubted it would have lasted another 12 months!

Do your techs and/or employees know why you need to charge what you charge?  If they don’t believe in the company’s pricing, they will tend to undercharge the customer.  There is a simple solution to the program.  This month’s Website Special is our Why Do You Need to Charge So Much? program.  It walks the team through a Sample Company pricing, therefore helping the team to understand what it “really” costs to run the company and why you need to charge what you charge.  The program is normally $139.95 but this month it can purchased for only $99.00Order today.  

Three Keys to Selling Your Business

By Glen Herman, Creative Business Solutions

Is now the time to sell my business?  Am I ready to sell?  What does “ready” mean?  Am I in a position to sell, do I have a choice?  What is my business worth?

Succession planning, transition planning, and exit strategy are terms we use in discussion of a transfer or sale of a business.   Timing effects each transfer of a business, but with proper planning, time can be on your side.

I’m often asked: “how can I get the most money out of my business?”  While the answer to this question is unique to the specific business, there are some universal truths to maximizing the amount of money at the sale of a business. 

The most important considerations in maximizing the proceeds from the sale of any business are development and documentation of systems and processes.  Buyers are typically looking for organized, profitable businesses that are structured (in terms of team and established organizational flow), and have systems in place for sales, work flow, inventory management, billing and operations. 

Financials- It is critical that owners have accurate financials that are current.  This allows for the management of the business by the numbers.  Buyers will be looking at net profit, seller’s discretionary earnings and earnings before interest, taxes, depreciation, and amortization (EBTIDA). 

Team structure- Having a professional team that is selected carefully and trained systematically will make your business more profitable, and therefore more attractive to a potential buyer.  Structure of a business is a key component to a business’s success, but also a contributor to the “good will” value in a sale.  Think of it this way… If a buyer can purchase a business that is structured and running well, it allows the buyer to “work on” the business, not “work in” the business. 

At the end of the day, we have to look at the financials and “good will” of any business when we place a value on it.  Other considerations include market factors, inventories, real estate, and buyer appetite for businesses in the geographic area of the business.  Employee experience, skillsets, and certifications are also considerations of potential buyers.

A valuation of your company should be updated every 3-5 years.  This will allow you to make timing decisions, and also ensure the highest value will be received in the transfer of the business. 

Glen Herman is a Business Intermediary for Creative Business Services in Green Bay, WI. Contact Glen at 920-719-2270 or at gherman@cbs-global.com.

PART 2 of 2 | Determine How your Profit Will Be Spent Ahead of Time

By Tom Grandy, Founder

Last month we discussed how most companies allocate every dollar they spend…except Profit.   We then discussed the differences in “accounting” net profit and “real” net profit from a cash flow perspective.  As a reminder, cash flow deals with the real dollars that flow in and out of the company.  From an accounting perspective, last month the company made a $21,000 net profit.  However, cash flowed out of the company in four other areas that were NOT accounted for from the accounting perspective.  When those areas were considered, the company’s “real” adjusted net profit was reduced to $13,021.  Those four unaccounted for areas were:

  • Equipment Replacement
  • Debt
  • Loan
  • Hill & Valley Account

 

If you would like to review last month’s article before proceeding, click on Part 1.

So, now we know the “real” profit for the previous month was $13,021.  If you have finished high school, chances are you have heard the term “All of nature abhors a vacuum.”  Simply stated, if there is empty space or a period of time that is unscheduled, it will tend to be filled with something.  It’s kind of that way with net profit.  Any profit left in the company’s operating account tends to disappear!  To keep that from happening, we need to determine ahead of time how any net profit generated, from a cash flow perspective, will be spent. 

Net profit needs to be allocated in four (4) areas:

  • Profit Sharing
  • Debt Reduction
  • Hill & Valley Account
  • Money Left in Operating Account

 

Let’s review each area. 

Profit Sharing (5%)

Chances are the company made a net profit because of the team.  The team is made up of all employees from the owner to the parts runner.  All worked hard to help the company make a profit therefore, all should share in the profits when the company makes money.

Typically, the company will want to take 5% of the net profit and share it will all employees.  The company not only needs to pre-determine how the overall net profit will be spent ahead of time but it likewise needs to determine how the profit sharing will be allocated ahead of time as well.  Below is an example.

 

Allocations can literally be based on any criteria you wish from income earned to years with the company. How you allocate the profit sharing is up to you.  The important thing to note is that the percentages are determined before the profit is earned.

 

Debt Reduction (40%)

Debt is a ticking bomb.  When all is well and the company is growing, debt is seldom thought of.  However, there is a good chance that at least some reading this article lived through 2008-2009 when the world, from an economic standpoint, came crashing down.  Those with low overhead and little debt made it through, others did not.  Being totally out of debt should be every company owner’s goal.  The sooner the company becomes debt free the better the owner will sleep.  When it comes to telling our net profit how it will be spent, 40% of it should be used directly for debt reduction.

Hill & Valley Account (40%)

What are the chances that it will rain in your area of the country at some point over the next 12 months?  Certain areas of California see little rain while the mid-west generally see lots of rain.  In either case, it’s going to rain at some point.  It’s just a matter of how often and how much.  Guess what?  Your company has slow times too.  The typical trades company has roughly 90 slow days per year.  During the slow times, how do bills get paid?  Most borrow money through a line of credit, utilize credit cards or delay payments to suppliers.  Although those work, they are expensive and make the company less financially stable.  A better way is to have monetary reserves held back for those rainy days. 

When we were talking about cash flow, one of the things we subtracted from the accountants net profit figure was a pre-determined amount of money the company was going to put back to fund the Hill & Valley account.  In addition to that money, 40% of the “real” net profit should also go towards funding the Hill & Valley account.

Now, some of you have been doing a bit of math in your heads.  If you are sharp at math, you have noticed we have accounted for 85% of the net profit.  Now the question is, “What happens to the remaining 15% of the net profit?”  The answer is that it stays in the company checkbook therefore building up a bit of extra cash flow.

We have now achieved our goal.  We have pre-determined where every “real” net profit dollar will be spent.  As time goes on the company will have funds to invest, buy extra inventory when it goes on sale, fund increasing inventory and accounts receivable, and/or invest in expansion. 

Company owners sleep a lot better at night knowing what their “real” net profit is.  They also rest better knowing that slow times are funded, debit is systematically paid off and the worries of increasing inventory and accounts receivables are funded.

Rewarding technician performance is important.  However, data must be collected in order to evaluate performance.  This month Grandy & Associates is featuring it’s Profit Smart KPI Tracker.  This program tracks nine (9) Key Performance Indicators for each individual technician.  This program will allow contractors to pay bonuses based on real, accurately measured, performance.  The good news is that it only $299 this month!  That is a $100 discount.

As always, Grandy & Associates offers a 100% satisfaction guaranteed.  If you are not completely satisfied simply return the program for a full refund.  Order today!

Employee Retention and The Great Resignation

By Dave Ramsey, CEO Ramsey Solutions

Employees everywhere have been looking at their options for a while now. They’ve been weighing the costs of making a career change, seeing if it’s feasible and mustering the courage to quit. It has become such an epidemic that many have begun referring to it by an ominous name: The Great Resignation.

According to some reports, more than 40% of employees are considering quitting their jobs. For many of those folks it’s a seller’s market, where their skills are more in demand than ever before. The flip side? Those shifting gears on their careers comes at a high cost to the businesses they leave. And for those jilted businesses, seeing employees depart has been a wake-up call to prioritize employee retention.

Why Employees Leave

The first thing to understand is that there are two types of employee turnover: voluntary and involuntary. Voluntary turnover is when an employee chooses to leave the company on their own terms. This could look like an employee leaving for a higher-paying job, burnout, a new mother choosing to stay home with her kiddo over returning to work, an employee leaving over differences with leadership, or an employee reaching their time to retire. Involuntary turnover is when the business chooses to end its relationship with the employee.

The problem is that too many companies think their employee retention strategies should only span from hire to fire when they really ought to stretch from hire to retire. By aiming to support the whole person and their whole career, you’re more likely to keep them around longer.

Effects of Poor Employee Retention

Anyone with an ounce of business sense knows their company won’t be as successful as it could if it’s constantly hemorrhaging employees. Not only does turnover cost a lot, it puts an unnecessary strain on the remaining employees.

Turnover is expensive. It can cost 50 to 75% (or six to nine months) of their annual salary to replace someone. Based on median salary data from the Bureau of Labor Statistics, just one median-salaried employee quitting can cost a company more than $38,000. How? Recruitment costs, training their replacement, potential lost revenue, the burden on other employees . . . And obviously if you end up paying severance, that makes it even more expensive.

5 Employee Retention Strategies

Pay Them What They’re WorthYou can’t expect employees to feel great about working at your company if you pay them less than they deserve. If you aren’t competitive with compensation in today’s job market, you’ll put yourself out of business.

Make a Regular Habit of RecognitionEmployees aren’t just units of production. They’re human beings who need to feel appreciated. Lots of times, employees just want genuine appreciation—in private conversation and in front of their peers. There are countless ways to show it without costing the company a ton of money.

Don’t Pass Up Talented Internal Employees for External Hires – If you don’t look at the employees you already have to fill positions of need, you’re doing it wrong. Your employees need to have an opportunity to grow in their careers at your company if they’re going to be there for the long haul. Without a clear path to career growth at your company, they’ll feel like their job is just a step along the way to their ideal landing spot.

Do Whatever It Takes to Build Trust – Employees need to feel like they have the trust of their leaders. When they’ve got leeway to flex their muscles and use their skills and talents, they’ll find more satisfaction in their roles. Clearly trust must be earned, but when you trust your employees—and they trust you—they’re going to invest a lot more of themselves in your company.

Offer Life-Changing Employee Benefits – The days of the status quo employee benefits being enough are over. If you want to be competitive in recruitment and retention, you have to offer life-changing benefits. Consider adding a benefit like financial wellness. Think about benefits like assistance with childcare, an HSA company match, company-paid-for long-term disability insurance or maybe student loan repayment and/or tuition assistance.

Employees leaving at record rates may not last forever, but the reasons for them doing so are sure to become the new normal. Business and benefits leaders must respond by adjusting their strategies to that new normal if they’re going to stand a chance at keeping their talent in house!

* Leadership and small business expert Dave Ramsey is CEO of Ramsey Solutions. He has authored numerous best-selling books, including EntreLeadership.

The Ramsey Show is heard by 18 million listeners each week on more than 600 radio stations and multiple digital platforms.

Free Resource

Knowing how to keep your business profitable is more important than ever.

Download our FREE e-book today and learn how you can keep your business running well for years to come, even when other businesses fail.