Business Intelligence for Custom Integrators
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Tuesday Morning Coffee
Welcome to the VITAL management Blog. We invite you to visit important topics, comment on postings and share your interest in our self improvemnt business model. Your particpation improves the results for all.
|Posted on March 30, 2015 at 8:00 PM||comments (2)|
SMALL BALL or MONEYBALL?
The movie Moneyball, based on the book by Michael Lewis, dramatized the beginning of the “metrics” era in baseball. The story showed Oakland A’s GM Billy Beane taking a decidedly non-traditional approach to evaluating players, assembling a team based on numbers rather than the gut feel of scouts and coaches. The results made for a really fun story. Baseball front offices haven’t been the same since.
You can do the same for your business. Instead of making decisions based on gut and feel (and the current balance in your checking account), you could implement a more metrics-driven approach that would help you better see the potential risk, and reward, of any opportunity you confront.
In the context of growing your business, this is an essential approach.
The Most Important Numbers
In our view, it is imperative that companies maintain their market share by keeping pace with the growth of the market. But this is not a purely top-line play. Growing sales is important. But growing profits is really important.
For this reason, we consider Gross Profit to be the most important number for your company to grow. GP reflects revenues and margins. After paying for the goods you sell, it’s the money you have left for bills and profit.
In 2014, the companies following our system grew sales a respectable 13.6%. But their GP increased by over 20%, while compensation grew by only 11.4%. That left some $2.5M of “unallocated” incremental Gross Profit, $2.1M of which went directly to the bottom line. The overall gain in net profits was over 90%.
This is consistent with the historical profit gains from our system, which have typically averaged over $100,000/year per company.
You can learn more about the metrics we use at www.vitalmgt.com/metrics.
And if you e-mail or call us, we can tell you about a significant MONEYBALL opportunity for $2M+ integration companies.
May you Profit, Grow, & Prosper!
|Posted on March 11, 2015 at 7:55 PM||comments (4)|
OK, so Growth is Imperative, but… What are the Risks, and… How do I manage them?
With new tailwinds in the economy and momentum being gained in high-end CI spending, what are the risks to growing my company?
- One is the shortage of qualified, trainable talent.
- Another is the risk of having client service levels decline because of added activity and chaos
- If processes are not well developed, more work will put more stress on people
- If the owner is in the middle of everything, he or she might be the most stressed person of all!
- Growth requires investment in people & infrastructure. What if there is a downturn in the future?
These are real risks and valid concerns; but not insurmountable. Here are a few of the solutions we see…
- Improving labor productivity could help you pick up an hour or more of billable time, per tech per day
- Add improved sales effectiveness to enhanced productivity and you could support as much as a 25% business increase without adding a single person.
- Process efficiencies could bring productivity increases to admin and management
- Organizational re-alignment could relieve the owner’s role from being critical to key outcomes
- Creating a dedicated service team could provide bandwidth for more project work
These are high performance strategies to enable growth, while improving profits. At VITAL Mgmt., we are fully committed to working on this with you.
Do the things to get your business in shape. Consider a resource to help you.
For many companies this is a great time to go to the next level.
Be strong and courageous. click here to see our methods for helping.
|Posted on March 5, 2015 at 6:35 PM||comments (1)|
Why Is It Imperative That I Grow My Business? ... And How Do I Do It?
Many CI owners have told us they were “just fine” doing the amount of business they’re currently doing. This is a vulnerable view.
According to recently-published research, the Smart Home market is projected for 17% compound average growth over the next several years. To put that into perspective, $2M in 2014 is projected to grow to $3.2M in 2017 (a 60% aggregate increase).
If the market grows by 60% and a $2M company remains at $2M, over $1M in market share will be lost to competitors. There is no such thing as “standing your ground” in a growing market.
There are other important reasons for actively growing your business…
- A business that’s growing gives customers more confidence than a business that’s not.
- A business that’s growing gives employees more opportunities than a business that’s not.
- A business that’s growing gives its owner more options than a business that’s not.
There are many, of course. We’ll start with 3 key issues that must be correctly managed to grow sales while also growing profits…
Financial planning & management. This goes without saying. You need quantified goals, strategies for achieving those goals, and a plan for how you will implement and manage the strategies.
Organizational Architecture. People are a huge part of any growth strategy. What should a $3.2M organization look like, compared with a $2M organization? We know it should have 15-18 full-time positions, but what should those positions be and who will fill them?
Customer Experience. Whatever customer-serving practices have helped a company get to $2M, need to improve as a company grows to $3.2M. Most companies do not have a client-nurturing strategy, let alone a focus on the quality of sales process, communication during the project, and a way to consistently complete the project with a Wow!
Great times lie ahead, if a company is ready to grow. Is yours?
|Posted on March 5, 2015 at 12:55 AM||comments (1)|
When is the Best Time to Work ON my Business?… And how do I find the time?
Many of the owners we’ve met tell us they get sucked into the day-to-day, every day, and never seem to have time to work on the business.
Others just feel like, “What a mess… Where do I start?” So, they don’t.
Truth is, taking time out to work ON the business is hard stuff. It requires taking yourself mentally and maybe physically out of the daily urgencies. At minimum, close the door, turn off the phone, and don’t look at your e-mail.
When it gets really busy this seems impossible. But that’s when you need it the most.
The best time to work ON your business… is NOW.
Discipline will set you free
When things are hectic, the tendency is to try and work faster. But you can’t outrun chaos – the faster you go, the more chaotic things become.
Instead, you need to moderate chaos with discipline. Slow down and take the extra time to do things right. This seems counter-intuitive – slow down while your desk is on fire?! Yet that is exactly what needs to happen to start bringing order to things.
In his excellent book, Mastering the Rockefeller Habits, author Verne Harnish talks about how “regimen will set you free”. He recommends performing recurring activities at the same time on the same day of every week; ie, “regimenting” your weekly schedule. The counter-intuitive outcome of a weekly regimen, is more time to work on the unplanned urgencies that come up every day.
A weekly regimen is just one of the disciplines required to conquer chaos. Not just the same things on the same day, but also things done the same (defined) way, by the same (accountable) people, followed by the same next step (process). Without constant questions as to who needs to do what, how, and when, every employee is enabled to perform at a higher level.
So, slow down for an hour or a day or even two. Spend time to identify the who-what-how-when of your work process. This will help quell chaos and produce better, more rewarding outcomes. Plus, it will save you tons of time in the future.
|Posted on February 18, 2015 at 2:00 PM||comments (3)|
What Is the Biggest Gap CI Companies Need To Overcome?... And How Do I Do It?
In a recent article found on the American Express Open Forum, author Dileep Rao made this most interesting comment…
“For my book Bootstrap to Billions, I interviewed 23 hundred-million-dollar and five billion-dollar entrepreneurs… The two strongest skills of the world-class entrepreneurs I interviewed…were sales and marketing, and accounting. During the research for that book, I found that these successful entrepreneurs were either accountants who knew how to sell or salespeople who knew accounting.”
In the e-Myth books, Michael Gerber talks about people who know how to do the work of a business (“technicians”) having an “entrepreneurial seizure” and deciding to start a business that does that work. But Rao makes no mention of technical skills or expertise. And to his point, the owners at bigger CI companies are almost always sales guys. This jibes with most of the integrators we know.
Sales are not the problem right now. In fact, these companies are closing deals left and right. Their problem is a growing production backlog. The gap is their ability to get more work done in a given amount of time.
Business Management Webinar
this Thursday (Feb 19) at 3p CST
Gaining Ground by Closing the Production Gap The opportunity is there for every CI business owner: capitalize on a healthy and growing market for your products and services. To do this you’ll need production to keep up with sales. In this fast-paced 40-minute webinar, Paul Starkey & Steve Firszt explore the production gap most companies face, and tactics for getting better. Designed for companies who’d like to achieve annual sales of $3M or more by 2017. Q&A to follow this complimentary presentation.
You might think the backlog means you should hire more installers. But we see companies whose installers produce under $80,000/year in labor revenues, and others whose installers produce more than $125,000/year. That’s a 50% gap! What about your company? Is your installer productivity where it needs to be? What can you do to improve it? We’ll provide some valuable insights during Thursday’s webinar.
|Posted on February 18, 2015 at 1:55 PM||comments (2)|
What Does It Take to Add Sales Capacity? And How Do We Sustain it?
Before we assert that it takes highly skilled salespeople or owners to drive sales at our CI businesses, let’s face the facts.
- Most companies have 1 or 2 sales people who are the rainmakers
- They have the relationships that evergreen our business
- Some are people persons, some are tech persons, and few are both.
- We struggle to find how to add more talent to our team
Have we made the process too difficult? Do we set artificial barriers: must learn d-tools, must know every SKU, must be a design expert, must spend hours generating a proposal?
Shouldn’t we be looking for the lowest common denominator of selling success?
How to take non-technical, good communicating people and making them $1M, $2M or more, high production salespeople?
Teach them how to scope a project without designing every aspect of it. Teach them to frame the system and qualify the client? Then, allow them to present the options to get a design spec or even a detailed set of engineering drawings as a deliverable?
We estimate 20% to 25% of proposals never get acted on with high-end clients. Yet we do the work; at sometimes, incredible time and effort, for all of them.
Two keys to adding sales volume:
1. Look for ways to add categories (lighting/shades, video distribution), raise the product choice level (e.g. higher starting price point on entry speakers), show the systems that are not being included in the scope and there are more dollar lifting ideas.
2. Speed the engagement process up by using a scoping document that qualifies, and sets the stage for more revenue from design spec work and engineering level drawings (can be 2% to 8% on bugger projects).
Take a good look at what you require for your current salespeople to be successful. Without certain, you can get 30% or more capacity and with a better process unlock the key to adding less skilled selling resource and getting better results.
|Posted on February 3, 2015 at 6:30 PM||comments (1)|
Is There Still an Opportunity for High-End CI Services?
With the proliferation of DIY smart home devices and the willingness of Gen X’ers and Millenials to use multiple apps to control things, one could paint a distressing picture for the future of high-end custom integration.
But is it our destiny to give way to the baseline services of Xfinity and ADT, or… Is there still an opportunity?
Steve & I come down solidly on the side of, there is a BIG opportunity.
The top 2% of US households have annual incomes of $400,000 or more. That’s approximately 2.5M households. If each of these households were to spend just $20,000 on a CI system, that would represent $50 billion in potential business. Some estimate the annual turn for luxury systems has grown to $1B per year; suggesting about 10% to 15% of the total market has been served in the past 10 years.
These households are not the type to buy Iris from Lowe’s, and most would want to receive something better than what Xfinity, ADT, or even Best Buy have to offer. These households are prime candidates for systems and services from CI companies that provide lighting, shades, control, networking, installed audio/video and more.
Unfortunately, the thousands of independent CI companies purporting to serve this market are impossibly fragmented in terms of market share, quality, and process. Only a very small number of people actually know about any one of them.
That’s the opportunity.
Imagine 50 to 100 top CI companies serving key markets across the US. Imagine they are united under a single luxury brand, with a nationally-promoted website directing inquiries from millionaires to local affiliates. Imagine further that these companies have developed a consistent, client-friendly sales process – with a common set of metrics to measure and manage company productivity, and customer satisfaction.
That is the mission of VITAL. For the past year, we’ve been working with a select group of dealers to research and test our ability to develop a national network of independent dealers. We are now about to embark on a 1000-day journey, under a soon-to-be-announced brand, that will lead us to become a recognized national delivery system for luxury CI services.
Along the way, each of our members will profit and grow in ways they could not have realized on their own. If your company is qualified – and if you, the owner, are committed to growing your company – you are invited to apply for membership in this exclusive group.
There is no other opportunity like this.
|Posted on January 28, 2015 at 12:10 AM||comments (1)|
Does Your Company Have a Habit of Creating WOW!?
Many times the completion of a project is more Whew than WOW! We discussed this with 13 CI business owners and they provided some good insight to what creates WOW! for their customers.
#1 – Do you have a “reveal” for the client? Once the work is done and the system is functional, do you go to great lengths to make the initial reveal fun, exciting, dramatic?
Is every final, a celebration or sigh of relief? Do you provide gifts (party baskets) that encourage inviting friends over to see the new system?
#2 – Is everyone who encounters the client tuned to WOW? Do they call ahead when potentially late for an appointment? Do they pre-confirm every visit? Do they acknowledge when key aspects of the job are complete, by text or e-mail?
#3 – Is the first meeting memorable, positive and electrifying with great ideas? Is there a professional presentation of your company and the possibilities?
#4 – Is the phone answered positively and helpfully, every time it rings? Simple things like, “Who am I talking to?”, and, “Have a great day”. When they announce themselves, using Mr. or Mrs./Ms. with their name. Are you diligent about not leaving people on hold… Does your phone ring 5 to 10 times before someone answers… Do you return missed calls?
#5 – Do technicians wear booties on site, dress uniformly, watch their conversations and break behavior? Do your employees act as if their Mother or Grandmother were on site? Do they refrain from complaining about the company or other co-workers?
#6 – How is your unscheduled check-in habit with clients? Calling to schedule a “let’s make sure everything’s right” walk thru 45-90-180 days after, can be a welcomed event by the client.
A clear attitude of WOW! can set your company apart. It goes way beyond technical knowledge, nicely-dressed racks, and a commitment to finish. It is the most important thing the client is buying: THE EXPERIENCE.
If you always Wow! them, there will always be more of them.
Share your ideas that WOW! with us.
|Posted on January 28, 2015 at 12:05 AM||comments (1)|
Why is it so hard to grow a business?
Part III – the Investment
Growth always comes with a cost. In Parts I & II, we talked about the ways Growth demands change. Not every owner knows how to direct and manage such change.
Growing a business also requires money, and often that money needs to be committed now, for growth to occur later.
Marketing is a great example of this. You don’t get improved website traffic and then upgrade your website. You need to invest in the marketing first, and hope it drives increased traffic and leads. Vehicles, physical plant, and software systems are other common “reap and sow” examples.
People are the most common. We have a formula we call STO…
Sales + Techs + Other = People needed
For every million dollars in sales, you’re going to need at least half a Salesperson, more likely a whole. You’ll also need at least three Techs. And, assuming annual revenue-per-employee (RPE) of $200K, you’ll need one Other employee. Identifying these positions in advance helps you better plan, spend, and hire.
A new hire should be worth about $200K in additional annual sales. If your company can earn a 10% net profit, that means the new employee should account for $20K/year in additional profits. If you pay the employee $50K/year, the $20K would represent a 40% ROI. If the new hire could guarantee you that kind of return, you would hire them every time.
The Biggest Gaps
In terms of key skills required for growth, most integration companies lack Financial Management and Marketing skills. You need one to plan and maximize the money. You need the other to drive revenue increases. Both skills tend to be expensive.
But we know multiple companies who have found a way to hire these skills and receive a 600% or even 1000% ROI. And the cost of the hire is no more than a $12/hour employee.
Incredible? Not at all. A fast-track to growth and profitability? Absolutely.
Visit us at http://www.vitalmgt.com/6-services. And for a personalized presentation of what growth could mean to your company’s future, call or e-mail Paul or Steve at their respective offices. Info below.
|Posted on January 28, 2015 at 12:05 AM||comments (0)|
Why is it so hard to grow a business? . . . Part 2
The easiest way to do things is to keep doing what you’re doing. Which is fine advice if the current outcomes provide enough financial reward to keep the owner happy, and the company viable. But in a growing market (eg, home automation), a company that doesn’t grow is losing market share.
Growth impacts employees: how they do their work, what the work is, who they work with and/or report to. Because change is uncomfortable, they are certain to wonder why the changes are being made. Perhaps most significantly, they will want to know, what’s in it for me?
To expect employees to do new things a new way – to get them to embrace growth – you need to address all the above. Starting with…
This is easy: improved pricing from vendors, more complete services for customers, greater opportunities for employees, a more valuable company for the owner. Every one of these makes the company a better employer. It’s when a company doesn’t grow that employees should be concerned.
It’s not enough to say you want/need to grow. Your growth strategy needs to be defined. Common strategies include improving employee productivity, adding new product categories, marketing to new customers, and selling more to existing customers.
Each strategy requires new people and/or resources and/or processes. These will need to be mapped out. Will there be new positions, new job roles, or both? How will these fit in with the existing practices? A functional flowchart that outlines what needs to happen, when, is a starting point. This can then be dovetailed with your org chart to assign accountability for each step in the process, while pinpointing any personnel gaps. Finally, how each process is completed should be documented, and used as a training tool for promoted personnel and new hires.
This all sounds like a lot of planning time, right? Like we said, the #1 reason companies don’t grow is lack of time. The irony is, having a documented process will save way more time than it takes to create the documentation. Another of our favorite sayings: “The reason you don’t have time to plan, is you never stop long enough to plan your time.”
We started this series saying, “To grow your company, you need to give something up.” What you do, and how you do it, are first steps. You also need to give up (ie, invest) some money.
We’ll talk about that next time.