U.S. General George Patton’s famous quote, “A good plan implemented today is better than a perfect plan implemented tomorrow,” is sound advice for any farm equipment dealer.
But even more important than implementing a plan — is simply having one.
Far too often, ownership and management get bogged down in the daily minutia of running a dealership, neglecting critical decisions about transition, priorities and legacy, says Arlin Sorensen, CEO and founder of HTS Ag, an independent precision farming company based in Harlan, Iowa.
During his opening session at the 2017 Precision Farming Dealer Summit, Sorensen challenged a sold out crowd of nearly 200 attendees to be proactive planners and account for both the inevitable and unexpected to achieve growth within their businesses.
“Growth is a challenge and there is a problem related to growth,” he says. “But it’s not your customers and it’s not your vendors. The real challenge with growth is leadership. We have to learn how to lead and grow people if we want to grow.”
Business growth — especially in today’s market — is a challenge. Sorensen shared statistics that showed less than 4% of all companies ever reach $1 million in annual revenue and less than 1% ever earn $10 million in annual sales.
While dealerships that were part of 2017 Summit program represented more than $750 million in annual revenue, Sorensen’s point wasn’t lost on attendees.
“As an owner, you’ve got to spend time figuring out how to drive shareholder value, how you create value in your company. It doesn’t happen accidentally...” – Arlin Sorensen
“The data says it’s hard to grow,” he says. “My guess is everybody in this room has gone well past the $1 million mark, but people are where the challenge is. Less than 6% of businesses ever go past 10 employees and 96% of businesses don’t get to their 10 year anniversary.”
Even if dealers successfully grow their business, sustaining it is another challenge. Sorensen notes that owners and management want consistent growth, but the reality is that it will be staggered with dips, peaks and plateaus.
He identified 12 key indicators or contributors to company growth. (See sidebar below). This starts with knowing which kind of model — indentured servitude, lifestyle, growth or hyper growth — is the best fit for a dealership’s precision business.
“I talked to a business owner recently who told me that in the last 8 weeks, he averaged more than 95 hours a week working on his business,” Sorensen says. “I told him, ‘If you don’t quit doing it, you’re going to die. But you’re certainly not building a business anybody else is going to want to buy.’
“If you’re running a company like this, you’re not going to be one of those few that get to 10 employees and ever grow to $10 million in annual revenue. The sad part of this is that by taking this approach, you’re assuring yourself that you’re not going to create value in your company because people don’t buy jobs, they buy companies that have value.”
Take a Mulligan
Owners and managers have a responsibility to be the drivers of growth within a business and this starts with a plan.
“The key to planning is to write it down,” Sorensen says. “If you don’t write it down, you didn’t create a plan. You had a hope and a dream, which means nothing.”
Part of the process involves efficient management of time. Everyone gets 168 hours in week to work with and Sorensen says this number is “a great equalizer” because everyone — from CEOs to specialists — has the same total.
“The difference is what we each plan to do with that time,” he says. “That’s why planning is so critical if you really want to grow, because you’re not going to get any more.”
Having a reliable structure in place can take much of the stress and guesswork out of the planning process. This was a lesson that Sorensen learned that helped him work more collaboratively with his employees to implement ideas.
“I’m an entrepreneur and a plan disruptor for our team,” he says. “A few years ago, we had to have a little heart-to-heart about my ideas because I would go to a meeting, make a long list of things that I thought we should at least think about, come back to the management team, throw it out there in the middle of the table and say, ‘What do you think of all these great ideas?’
“Then they would spend the next week trying to decipher what it was I was thinking about and figure out how they could potentially do them. They may have been good ideas, but realistically, I was just confusing them because they had no direction.”
Sorensen and his team came to an agreement that they call “mulligans” where each year, they write down organizational and individual plans. Sorensen says he gets 3 mulligans per year. These are 3 things outside of the original business plan the team should consider.
“There were years I could have used 300, but this structure has totally changed the way we work together as an organization because I’m very careful about what I say,” he says. “It needs to align with what we do as a company. But the plan drives what we do and that’s what we have to get to if we’re going to grow. Plans don’t prevent us from doing good things, they enable us to do good things.”
Find Your HABU
One of the greatest challenges Sorensen sees with dealership owners is that they often get stuck managing the chaos of the day and spend little or no time actually advancing their business. There are 3 roles that need to be filled within a company — ownership, leadership and management.
“A lot of dealers have to wear all three of those hats and unfortunately, the management hat is the most dominant almost all the time because that’s where the chaos happens, that’s where all the people are,” Sorensen says. “As an owner, you’ve got to spend time figuring out how to drive shareholder value, how you create value in your company. It doesn’t happen accidentally. Leaders have to look into the future and bring the future into the present so you can start to plan for it.”
Some questions that need to be answered are “How are we going to address the change in technology that’s happening around us?” and “How are we going to address the change in generations that is going to totally revolutionize how marketing and buying happens out there?”
If it’s one person responsible for all three roles, there needs to be balance. Sorensen offered a simple, but effective acronym that guides his company’s management strategy.
“We call it HABU, which stands for highest and best use,” he says. “You need to think about where you’re going to invest your 168 hours each week to have the highest and best use, and it may not be where you think.
“As an owner, there are four HABUs that should be important. The first is owning your culture. You don’t have to execute it, but you need to own it and define it. The second is knowing your key talent because people are going to be the secret to your growth. You need hire them, you need to invest in them, you need to mentor and train them.
“Third is relationships with key customers, key vendors and external resources. You’ve got to own those relationships. Finally, you’ve got to own creation of business value. Owners who are really growing their company are focused on these goals, not the chaos of the day, not the customer who called to complain about something and not the vendor who says, ‘Well, how come you’re late paying your invoice?’ They know how to use their time to be effective in growing.”
One way or another, every dealership’s owner will exit their business someday. Whether it’s a planned or abrupt departure, there will be a legacy left by that owner.
While there are multiple ways to create a legacy, it’s critical that business owners proactively plan their exit strategy, rather than wait for the inevitable. Sorensen shares a story about a 36-year-old peer group member who died suddenly and didn’t have a plan in place for his business or transition of wealth.
“I got the call because Monday was payroll day and this owner was the only guy authorized on the account to sign checks,” Sorensen says. “His number two in command said, ‘We’ve got to get some money so I can pay people, because if they come to work Monday and don’t get a paycheck, they’re going to get real nervous real fast.’
“But this owner had also gotten married about 8 months earlier and as part of our peer group, we ask members to put together a legacy plan. He’d been working on his, but unfortunately, didn’t get his financial and legal documents completed and his wife didn’t get anything out of the estate because of one reason — he didn’t use any of his 168 hours to do the important things. Legacy matters.”
Another important distinction owners need to understand is that hard work doesn’t necessarily translate to business value. People pay for companies that consistently make money over time, Sorensen says. Traditionally, there’s never as much money left after an exit as expected.
Owners also need to take the initiative in driving that business value. “Nobody on your team who’s not an owner is going to wake up in the morning wondering how they can drive the business value of your organization,” Sorensen says. “Employees don’t care. We don’t pay them to care. We pay them to do a job. They care about their paycheck. They don’t care about your future so you have to own it.”
Still, Sorensen says it’s important to be accountable to someone and know who that person is. Being the boss provides certain freedoms. At the same time, they can create problems if they do what they want to do, rather than what they should do.
“If I look in your checkbook, look at your calendar, and see what you’re thinking — what are the priorities that would be obvious?,” Sorensen asks. “Everybody would tell me that family is a priority, but does that really show up when we look at how you spend your money and your time and your thought process? That’s another area we’ve got to be accountable in.
“If you were to die today unexpectedly, what kind of legacy would you leave? Have you got a plan that will take care of the people that you care about? If you haven’t planned it out, you don’t. You’ve got to be intentional.”
An Owner’s ‘Must Do’ List for Precision Business Growth
During his general session kicking off the 2017 Precision Farming Dealer Summit, Arlin Sorensen, CEO and founder of HTS Ag in Harlan, Iowa, shared 12 tips for plotting a course for business growth.
- Make the Decision: Understand and commit to the type of company you want to run — indentured servitude, lifestyle, growth or hyper growth.
- Create the Plan: Planning is the foundational skill if you want to grow. It doesn’t happen accidentally.
- Work on the Business: Don’t get stuck in the chaos of the day and realize there are three key roles to play in an organization — ownership, leadership and management.
- Realize Your Limitations: Business bottlenecks happen at the top. Realize that growth depends on people, so invest in them and train them.
- Sell, Sell, Sell: Define what you are going to deliver and how you are going to do it. Mature your sales team and go from chaos to predictability so you know what’s going to happen, especially with precision farming technology sales.
- Tell Your Story: Realize that by 2020, over 50% of the workforce will be millennials. Embrace and adapt with technology because your future employees will expect it.
- Stay Inside the Lines: Companies that grow learn this approach and follow a process. They actually have it written down and everyone in the organization knows how things are supposed to be done.
- Communicate with Clarity: Growth is dependent on communication. Realize that not everyone hears and listens and understands the same way, especially across generations.
- Know Your 20 Mile March: If you want to succeed and grow, you’ve got to be consistent with your mentality and approach. What are the things we’re going to do every day as an organization? What am I going to do as an individual and leader in this organization every day to be consistent?
- Leadership is the Foundation: Leaders are made, not born. It’s the art of getting someone else to do something you want done because he wants to do it.
- It is ALL About Relationships: The most important single ingredient in the formula of success is knowing how to get along with people.
- Begin with Legacy: Growth companies have an intentional plan. Anticipate transition and change and build a business that translates into value.