Lori Stuckert

This is the Way to Grow Your Business

By Tom Grandy, Founder

Working with this contractor, as a customer, was an out of body experience!  It was kind of like riding a great roller coaster.  Each part of the journey gets better and better.  The ride ends and you take a deep breath and say to yourself, “That was a great experience.”

The paint store recommended a specific painter for our project as it meant stripping and re-staining our front door.  It takes a unique talent for this type of work.  I was not familiar with the company they recommended but I made the call.  To my complete amazement, the owner answered the phone and set an appointment to meet with me the following day.  He showed up right on time.  My wife and I walked him through our list of painting needs both inside the house and outside.  He took notes and made a list of what needed to be done.  After sharing his hourly rate, he informed us that since it was fall it would be at least 6 months before he would be able to do the work.  We were a bit downcast but to date, had not been able to find any painter willing to tackle the door.  He was given the go ahead and we were on the list.

Two weeks ago, he called.  Since we had inside and outside painting to do and it was still too cool to work on the door, he asked if he could start the inside painting the next day.  We gave him the go ahead.  He told us he and his son would be at our home at 8:30 AM the next day.  They showed up at 8:30 AM sharp!  After some introductory chit-chat we discovered this father/son team were third and fourth generation painters.  His grandfather was a painter and had 12 children, seven of which were boys.  All the boys were painters.  His dad was one of them.  Their work ethic and attention to detail quickly became evident.  They were not only good at what they did, they enjoyed it!

We never touched a thing.  Furniture was moved, pictures were taken from the walls and clean drop cloths covered everything.  They left at 3:00 PM but before they left everything was in order.  Drop cloths picked up, all paint and supplies were neatly stored in the corner of the room, and they vacuumed the area.  Yes, they vacuumed the entire area!  Except for their small pile in the corner, all was neat and clean.

Each day they arrived at 8:30 AM sharp and left at 3:00.  Later we found out that he left at 3:00 each day to go do estimates for customers.  He explained that he answers every phone call personally and visits each potential customer the next day, no matter how backed up he may be.

The quality of their work was amazing, and they were fast.  What I thought would take at least a week to do, inside the house, took less than three full days.  Best of all, the price was about a third of what I expected.  Quality workers tend to work fast because they are good at what they do.

By the time they left everything was back in order.  Furniture was in its place and all pictures were back on the walls.  If you didn’t know they had been here, you would never know it. 

What Did We Learn?

  • Answer the Phone – It’s hard to make a sale if you don’t answer the phone. If your company is large, it may take a team…but answer the phone 24/7/365.  If you or your staff can’t answer it personally, have someone (real person) answer it.  When a customer calls, they want to talk to someone or they would not have called.  If no one answers the phone, the lead is likely lost.
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  • Give the Customer a Visit ASAP – Remember, the customer called because they have a need. Slow responses give the impression you are not interested in their business.
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  • Show Up on Time – Show up for bid appointments and for the actual job on time. Respect the customer’s time.
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  • Tell Your Story – Potential customers want to know how long you have been in business and why you started the company. In general, you need to share your history.  It creates a bond and builds relationships.  Customers want to work with people they trust.
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  • Fully Realize There Is a Direct Relationship Between How Clean You Leave the Site and the “Perceived” Value of the Work – Most customers see a direct relationship between the quality of work performed and how clean the area is when the work is done. Clean the area when you leave = Great job.  Mess when you leave = Poor quality of work.  It may not be true but perception (in the customers mind) is truth.
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  • Top Quality Work Is a Given – Top quality work is very important. However, if you fail in the above areas, quality work will not be enough to win over the customer.
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By the way. How many people do you think I will share with about the great painting job I just had done?  That is why my painter invests zero dollars in advertising and marketing.  Word of mouth keeps his schedule full.

Although everything we just discussed is true, if the product or service isn’t priced right the company is still going to go out of business.  If your office staff and employees don’t believe in your pricing, they will tend to undercharge the customer. 

This month’s Website Special is our Why Do We Need To Charge So Much? program.  It helps everyone within the company understand why the company needs to charge what it charges.  The program is normally $139.95 but this month it’s only $99.95Order today and enter coupon code: Why40 at checkout.   

Valuations & Pricing of a Business For Sale…What Should be Considered

By Glen Herman, Business Intermediary, Creative Business Services

We often discuss the importance of clean and accurate financials when running a business or positioning it for sale.  To properly value your business, you will need to have 5 years of financials (specifically, the Profit & Loss Statements and Balance Sheets).  While the financials will help determine the baseline of your value, they may not reflect the potential pricing of the business in terms of what the market is willing to pay.

We often see “rules of thumb” and see calculators on the internet when it comes to the value and pricing of businesses.  These are often based on a multiple of revenue or income but inevitably fail to consider some key components that will leave money on the table when you exit your company.  The reason is simple, they often fail to account for the personal use items that can be added back to earnings (cell phones, autos, etc.) and, also fail to consider the market forces that impact value (scarcity of labor, geography, availability of capital, etc).  We will discuss a few of these methods and considerations:

 Multiples of earnings:  While these are typical starting points for the value of a business, there is a lag time between the data reporting of business sales across the nation, and the valuation of a business at a given point in time.  We have seen an increase in multiples since 2021 in several sectors.  Although these multiple changes do not represent dramatic shifts, having an in-depth understanding of the market niche clients are in can have an impact on value.  Think about the difference between a multiple of x3.5 and x4.0 would do to a business with earnings of $500,000/year.  “Rules of thumb” in the case of multiples are not the most effective means of determining value.  They really need to be considered by a valuation and pricing specialist. 

Scarcity of labor:  There are occasions where a buyer is looking to expand market share or grow into a specific territory but is constrained by labor.  This can mean a potential value proposition in terms of sale value.  Labor can be a large barrier to entry for competing firms to enter your market.  If you have a well-trained and professional team, there is value there.  A firm’s greatest asset is often times it’s people!

Geography:  For well established companies (not in terms of longevity but in terms of market share) that have 90% market share in specific communities, geography can be a barrier to entry for competition.  If demand for entrance into a specific geography is desired by the market of buyers, a premium may be available in terms of pricing of a company.

Buyers-test method:   This is a determination of value that provides the value based on what traditional lending sources are willing to lend to a buyer to purchase a business in a particular industry of a particular size.  While this approach takes into account traditional financing, it does not look at creative deal structure, like owner financing and earn-out provisions.  This is often the consideration of value that individual buyers will focus on because they are using traditional lending.  A business broker can help add value to the sale through creative deal structure to maximize seller value. 

When considering the sale of a business, a professional business broker sets a sale pricing with their clients based on the determination of financial value, market value, and market appetite.  While the process of setting a price begins with the valuation, the process of positioning a business for sale often starts years before.  An early result will almost always result in a higher sale value!

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

Just Add Value to Their Lives

By Dave Ramsey, Ramsey Solutions

Turnover rate is a vital measure of a company’s overall health

Turnover rate. It isn’t fun, it isn’t sexy, and it has absolutely nothing to do with delicious pastries. If you know anything about balancing the science of running a business and the art of having employees, you know it’s a vital measure of your company’s overall health and culture.

Employee turnover rate pertains to the percentage of your employees who leave your company over a specific amount of time. Think about all the people who quit voluntarily, are fired or choose to retire. That’s what you should factor in when calculating your company’s turnover rate. Why is it so important to keep that pulse? Because you need to know when and why employees “turn over,” not just wave goodbye and hope you can replace them quickly.

How to calculate turnover rate

As if employees leaving wasn’t painful enough, now we have to do math. Most companies want to know their employee turnover rate on a quarterly or annual basis. Why? It just takes that long for anything meaningful to show out of it.

Here’s how to calculate turnover rate:

                                                     Number of employees who left
Monthly turnover rate % =    ———————————————    x100
                                                     Average number of employees

                                                                    Number of employees who left                         
Annual turnover rate % =    —————————————————————    x100
                                                   (Beginning + ending number of employees) / 2
                                                                     

                                                 Sum of employees from all pay period reports                     
Average # of employees =   ————————————————————-
                                                                       Number of reports

What’s a high turnover rate?

The question every leader asks when it comes to turnover is: What is a high turnover rate? The answer is that it depends on the business. You’ve got to calculate it over time, combine that with what you know to be true about your specific business and industry, and factor in your understanding of your employees.

No one wants to be in a bad spot with employee turnover. It’s a huge, expensive pain that takes a ton of time and effort to fix. That said, a high turnover rate usually happens because of a combination of things: company culture, compensation, benefits, job market conditions, employee stress, and more.

If you want to compare your business’s turnover rate to national averages, the Bureau of Labor Statistics is a great place to start. Beyond that, the most effective way to reduce turnover rate is to take a long, hard look at how your employees experience working at your company.

Reducing turnover rate

Understanding where your employees are coming from and what they’re dealing with is like having a silver bullet to solve many of your company’s retention problems. It’s also vital to have a firm grasp on the competitive hiring landscape. What’s that mean? It means knowing where you stand in the marketplace, and not being behind the times—or your competitors—with what you’re offering employees.

While conventional benefits form a good base, today’s employees want and need more than just the basics. They need life-changing benefits to justify staying in one place for more than a few years. And your company stabilizing its turnover rate for the long-term depends on it.

Recruiting isn’t just about hiring new employees. You’ve got to continuously do things that build your culture, and make your employees want to stay with your company. That means your employee retention strategies—your culture, compensation and benefits—need to be unique and on point.

If your employee turnover rate is high, it doesn’t necessarily spell doom for your business. Having a healthy employee turnover rate is possible, and it doesn’t take a complex process to get there. It just comes down to adding more value to your employees’ lives!

* 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.

Knowing Your Numbers Increases Sales

By Tom Grandy, Founder

How did you determine the price of your last job?  Was it based on what others sell similar equipment for or was it based on your actual costs of doing business?  Do you discount jobs?  If so, why?  Did the customer tell you the job was yours at “X” price or did you simply discount the job because you felt like you could, should, or needed to, to close the deal?

Knowing what you need to charge for a retrofit or new installation job changes everything.  Going through the detailed process of setting hourly rates (from a cash flow perspective) provides the owner with the necessary knowledge to sell a job.  Knowing the price quoted will generate a specific net profit is powerful.  Knowing the breakeven price is another great tool when it comes to sales.

Below is a report from the Job Pricing Calculator of our newly rewritten Planning For Profit Software™ program.  Note, it shows the suggested retail price along with the dollar and percentage of profit, that price will create.  The below example tells us the price needs to be $4,207.00 based our on desired hourly rate for installation of $52/hour.  Note, it also tells us the breakeven price of $3,559.64.  That price covers all business expense, including salaries.  It simply does not generate any “net” profit.    

I don’t know about you but knowing those two numbers completely changes my countenance when I am talking to a potential customer.  I am far less likely to discount if I know what price I need to charge to hit a predetermined net profit.  If I find myself in a position when I need to discount, I at least know how low I can go and still cover my costs.

As a reminder, never just discount the price of the job.  That is why the customer needs to be presented three price options Best, Better and Good.  If the price goes down so does the offering.

Why show the Best price first?  Last year I bought a new car.  There were three cars my wife and I were considering.  One was a Honda; another was Toyota and the final one was a Nissan.  The same dealership handled all three brands.  We explained to the salesperson the three options we were considering.  He first had us drive the Toyota Highlander.  It just happened to be the most expensive of the three.  We went for a test drive.  Wow, it was amazing.  I had never driven a vehicle with electric steering before, but the difference was amazing as were many other features.  Test driving the other two brands (Better and Good) literally paled in comparison.  There was no question.  If we were to purchase a new car it was going to be the Highlander. 

The confidence provided by knowing your “real” numbers is hard to describe until you know them.  Knowing what your real net profit will be at each price level and knowing your breakeven price makes all the difference in the world when you are presenting the customer with the quote.  Secondly, providing Best, Better and Good options accomplish the same purpose as discounting…without losing money.

Many contractors are getting older and/or have parents or grandparents in that situation.  If you have any responsibility for those individuals, ask yourself a few questions.  Do they have a will?  If so, where is it located?  What banks or investment firms do they use?  Do they have a life insurance?  How much and who with? Do they have a safe deposit box?  If so, what bank and where are the keys?

These are the kinds of questions most of us ask when it’s to late!  This month’s Website Special is the What’s Where When You’re Gone? manual.  This 69-page manual literally covers everything you will need to know from debt summary to lawyer’s phone number.  The normal cost is $27.00 but this month it’s only $24.00.  Order today!

Developing a Strategy for New Leadership

By Dave Ramsey, CEO Ramsey Solutions

If your company lacks a clear strategy for moving talented employees into leadership, now’s the perfect time to establish one. As Baby Boomers retire, employers are busy grooming younger employees to become new leaders. Companies are spending thousands (some tens, and even hundreds of thousands) annually on the task of growing talent strategically.

One way to foster a climate of support for aspiring leaders is to give senior leaders visible roles that go beyond the basics of hiring and project management. Ask current leaders to act as mentors, lead seminars, and provide feedback to their teams. Some employees, when they see more of what’s involved in leadership, will be motivated to step up and learn more.

But not everyone on your team is destined to lead, nor does everyone wish to try. That’s why you need a method for selecting the best candidates to become leaders. Here are three key factors to keep in mind when planning your leader development program:

Foundational traits 

The foundational qualities are pretty hard and fast, and can be tough to change over a candidate’s career. These include complex problem-solving skills, and the ability to empathize and work well with a team.

The growth factor 

Unlike the foundational qualities of leadership development, the growth factor leaves you a lot of room to help your employee develop. Some of your team will leap at the chance to grow into different job duties or more responsibilities. But for others, even some who show strong foundational traits, you’ll need to help them discover and appreciate their own potential areas for growth.

The growth factor ties in with your company’s supportive environment for developing leaders as well as the individual’s personal interest in the specific area of leadership. Both can be cultivated over time to facilitate the development of talent.

Career dimensions 

This factor covers anything from the candidate’s background to the training and education that make him a likely candidate to lead in your company. Does she tend to take on extra tasks and complete them with excellence? Does he work consistently to grow and enhance his mastery of relevant skills, or seek to broaden his understanding of other aspects of your company’s business? All these are good indicators of a candidate’s leadership potential.

The Boomer exodus from the job market doesn’t have to be bad news for leadership in your organization. By encouraging current leadership, looking for willing new leaders, and creating a supportive culture for candidates, you can grow first-class talent strategically and successfully over time!

* 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.