Everybody has problems, some are harder to solve, and some
are caused by our operational policies of choice.
Testimonial Notes: by Ray Hauenstein (MasterShopCoaching.com)
To solve this we changed authority figures and that problem went away. It was apparent also that our local promotion was unable to generate new business, so I instituted a backyard marketing program involving all the employees.
The sales picked up and even during times when the whole neighborhood had slowed down – we began to recapture our shortfall and soon surpassed it. You can still grow in slower times! Most of the times your competition will assist you here – as he will stop advertising to save money. Your efforts are now more effective.
A new marketing focus can turn around a money pit
Another shop owner had been trying for 5 years to get the shop profitable enough to pay off old debts and establish an income stream for the two owners. They had been borrowing from the family patriarch whenever they were short and needed to meet their bills.
That debt had accumulated to nearly one hundred thousand and the patriarch suggested that they either fix the business or sell it. We started with employee review, cash flow and pricing. I set a program by moving into the office and taking over the phone calls. I controlled all complaints and leads and brought immediate attention to problems. I started a personal marketing program. The best way to grow was to establish a commercial side of the business.
I then hired a counter salesman to do sales my way. We aggressively went for city, county, state and federal business. We put a new clean face on the store and streamlined the service procedures. Within 3 months we began to see growth. Personnel were a problem; we had to change our perspective. We replaced uninspired employees with producers. We spent less on advertising and more on backyard marketing. Phone calls, faxes, emails. We went, in one year, to 3 times the volume and began to expand the facility.
This was a franchise store. When we started we were 65th in rating out of 78 national stores. We were in third place within a year and soon became the number 1 facility. What started out as a volume annually of $360k, in three years went to 2+ Million.
Others in the franchise asked for help and the franchise personnel had them contact us. We were able to help many. Once the owner had a vision of where he could go, we simply placed the right people and put the programs in place around him and it all came to pass.
A new structural focus can lead to success
A Phoenix consortium decided that their efforts of owning 3 automotive shops was not producing enough volume. They had even opened a wholesale supplier store to sell to their 3 retail stores at lower costs. The stores were failing and they decided to either salvage or close each operation. I was given a time frame of 90 days with which to accomplish my proposal.
We closed several stores and decided to develop the wholesaler entity. We cut expenses to minimal costs and began a hands on marketing program. Within 6 months we had grown enough to regroup. We sold the profitable shop and grew the wholesale supplier portion. We increased inventory, added product lines and expanded our territory statewide.
Within 3 years we were at $3,200,000. This resulted in a whole other direction of pursuit than what we had at the beginning. Sometimes changing the objective is the thing to do. However making the entity grow by marketing properly is the best. In the above case we found another venue more promising.
A vested interest is key
A Colorado entity had been growing their shop and it was just about as big as their talents could take it. We assessed the options of further growth. It was profitable, but just barely and the principals were not happy with the skimpy profit generation. Often management has a tendency to pay well – before they get results and then complain when they don’t get as much volume as they want. In a case such as this, the employees make a good living but the owner doesn’t.
The Colorado entity owner considered selling the business, but wasn’t sure the family employees could work for another owner, so they asked how to accomplish this. ESOP was the answer –(Employee Stock Ownership Plan). It was suitable for both parties and the reasonable solution. This is also great for retiring owners.
An unmotivated manager
Another large market shop owner has been in business for over 30 years. His family had grown and moved on. He began to see his portion decline in monthly sales. Because he owned the property free and clear and the residence was on the property – his overhead was negligible. In spite of low costs he was trying to figure out how to increase his numbers. Possibly, he should raise his prices. He had minimum staff, so trimming
payroll made no sense. We spent hours assessing his cash and material flow.
It became apparent that the sales and shop manager duties were up to one man and a closer view showed that prices were already too high. They were losing business to a close-by competitor. Business was being lost because
the lead conversion rate was terrible. The manager was too well paid. He was commissioned and only needed a few sales to make his comfortable amount. It was a good job for him, but only for him. The owner didn’t have to be involved in handling customers.
Being out of the flow, he was unable to see the leads dissipate. As an elder inactive owner he refused to replace the manager or change his compensation rate. Instead he decided on going for more leads. This, he decided, was best. Just increase the lead count and hopefully get a larger number of sales closures. It would have been healthier and less work to just adjust prices and retain and develop what he already had.
Rule: Scale the pay to the job you want done. Don’t pay for success before you get it.
Rule: Don’t make the assumption that your managers will be happy working for you forever. They too want to own their own.
Rule: As soon as prosperity occurs – people stop striving.
Rule: It’s striving that causes growth. Coasting (without pushing) causes withering.
Rule: Efficiency comes when overload occurs. Maximum effort at minimum cost.
Rule: Reward for achievement – but not for mediocrity.
Rule: Keeping an employee that is not ‘producing as advertised’ will keep you under your goal. Inspire or release.
Rule: Never fail to call the shots in your business. Employees have no capital at risk – you do.
Rule: As you grow do not increase your standard of living. Put excess away for a slower times slush fund.
The bottom line is this…..
It is vital that when analyzing potential in a business that there be no parts that are off-limits. Everything must be evaluated. We are not all equally gifted. Orchestrating the elements of a business will make it run smoothly.
Clumsy management techniques do not and cannot keep good employees, or attract customers. As your plan for growth is building, you will be tempted to increase your overhead and go for more
Operate frugally, as capital can be reversed quickly. Capital you expend in starting a business can be difficult to retrieve. After all tries are exhausted, if the effort is not successful – you must consider curtailing the effort. Continuing to apply capital after that decision is made – is futile. Never spend a dollar to retrieve a dime. In all expansion plans you make, you must give it a time by which it must succeed.
Endeavor to succeed, but know where the ‘red ring’ is.
Ray C. Hauenstein, all right reserved