Good dealers will come out of a recession, depression or crisis stronger and ready to take on the competition with excitement and vigor.
In 1981-82, it was a bad year to be new in business. I was young and had never seen business that bad before. I told my boss we needed more advertising (expense) and more employees (expense). He was older and wiser than I. Thank God he knew what he was doing.
He pulled in the expenses focused on employee productivity and working smarter. He knew the correct levels of expenses work in any type of economy. They don't fluctuate from good economies to bad economies.
Last week, a client called telling me that managers were coming to him and complaining about the tight expense levels that he was enforcing, and telling him that they needed to discount in this economy to remain competitive. Now older, (I've got the white or gray hair to prove it) and wiser (I hope), I told him to stay the course with his expense controls and not to discount his products or services.
What Is Happening?
• Chicken Little Is Working Again! Many people in the news, the government, your competition, your customers and your employees are all saying that the sky is falling. They all tell you things are bad and you have to lower your expectations and discount your products and service. They tell you that they can't maintain your standards of performance and profit in this economy.
• Compared to the budget acceptable results are not being achieved! The budgets that you established the end of last year for this year are already out of kilter with the actual financial performance — and compared to last year's actual numbers, nothing seems to be the same!
• Managers are all going their own direction. Without a clear game plan, they all try and do what they think is a "good job," but that's filtered by their focus on their own department's performance.
• Salespeople want to discount. They tell you they can't sell in today's economy at the high prices of last year.
• Bankers and other creditors want monthly financials. The old process of quarterly reports is not acceptable any more. They want quicker information.
Staying the Course – You Need To:
• Have a Clear Business Plan: Have a plan for employee productivity that everyone knows, and have expense levels that are already industry-realistic, and hold to them. And don't forget that a business plan needs to have "PLANNED PROFITS" or you will not have the cash flow and staying power to get through good and bad times.
— The Currie Financial Model has been designed with industry experience and best-practice experience. By using the approach of percentages, instead of "budgeting," it is constantly flexible to sales cycles and economics. But it always maintains profit levels based on your sales mix.
— Are you using it for your comparison of best-practice performance? Do you need help in structuring your financial reporting to compare to these benchmarks?
• Delegate Responsibility: If you have a clear plan, you need to get people involved in it, and they need to be accountable. In our work we have found employees and managers really appreciate knowing what is expected of them, and having clear and consistent reporting of how they are doing.
— Managers need financial reports; sometimes they need the scoreboard of how they are performing.
— Do you have performance scoreboards established for front line employees? Do their scoreboards measure actions and results that are in their control? Do you need assistance in designing and presenting these scoreboards that will measure employee performance?
• Sell Value!: Value is never measured in price. If you can't explain your "package of value" how will your sales people, your parts people or your technicians?
— You need to have the meeting: Present to your employees why your company has more value to the customers than just price and discounts.
— Company Mission & Vision Statements: Do you need help organizing and presenting your company mission and vision to your employees, your branches even your customers or bankers? Currie Management Consultants has assisted dealers and distributors for years in organizing their company and presenting what they do best.
• Get Closer To Your Customers: You will know better what your customers and prospects need and want when you spend more time with them.
— Find the most important accounts for your business. Who's calling on them, have you been paying as much attention now as you did last year? Don't the big account represent those accounts that continue to buy in good times and bad? So what are you doing to stay in close communication with them?
— Run your descending sales report. Analyze the largest accounts that do 40% of your business in the last 5 years; then group the accounts that do the next 30% of you business, then 20% and finally the last 10%. If you need help doing this, contact Currie Management Consultants, we have done this for many companies and would be glad to show you what the impact can be for you.
• Organize Your Finances, Banking and Credit: Many companies are finding that credit institutions are giving them credit conditions that were not imposed before. Credit cards have tighter limits, bankers want financials more often and customers are slower to pay.
— Establish firm financial policies that are clear: Some banks have financial formulas for measuring your debt level or your leverage, you should also have clear benchmarks of what your level of aged accounts receivable can reach and what you will do about them as they reach each level.
— Sometimes you should educate your banker – Currie Management Consultants working in your industry has designed a set of best practice financial benchmarks that have strong industry support and depth.
Since local bankers need to deal so broadly with pharmacies, bowling alleys, manufacturing operations, insurance companies and equipment dealerships they can't be experts on all industries and frequently rely on their generic benchmarks for inventory levels, A/R levels and credit ratios.
Currie Management Consultants has come in and presented the industry best practices for many bankers to explain why equipment dealers need certain levels of financing. If this is an issue for us, call our office and we can talk about what we can do for you.
When we talk with clients about successful change we frequently tell them a number of key points about making change successful. There are 5 points:
- Executive Commitment
- Vision & Design
- Training & Skills
- Measurement & Reporting
- Analysis & Feedback
From what we just talked about, I want you to remember the "Executive Commitment." Don't get swayed with the pressure of youth. Good input and viewpoints are important, but strong commitment to the vision and design of a good business plan are critical in an economy like we are experiencing. Don't forget the strategic expenses of training your employees and establishing productivity benchmarks for them.
People, employees, customers and vendors can get nervous and panic in an economy like this. Your job as leaders is to continue to communicate the vision, the financial business plan and to hold the course. Leadership needs commitment and strength.
If you already belong to a Currie Management Consultants, Inc. Best Practice Group, go back and review the notes from the last session. What did you plan to implement to improve your dealership? Have you accomplished it yet? Maybe look at the last couple meeting's notes. Sometimes in reading the notes you will remember a comment from another dealer that will spark your memory about an idea. One dealer told how he does shop quoting, and another dealer took that idea back and added $450,000 to their bottom line in one year. Sometimes it can be that simple.
If you don't belong to a Best Practice Group (or 20 Group) maybe you should ask what options are available for you. This is a time to be learning from your peers and finding how to sharpen your skills, profits and employee performance.
Good dealers are using this economy to bring expenses into control, push employees to reach productivity levels and achieve the model profit levels they should achieve. Good dealers will come out of a recession, depression or crisis stronger and ready to take on the competition (or what is left of them) with excitement and vigor.
Who will you be? Will you be the one that comes out on the other side strong and ready for battle or the weak competitor that did not make it through? You have control — make your choice!
George Keen is senior consultant for Currie Management Consultants.