This past week I was speaking with a shop owner who sounded like he was about burned out. Somehow the conversation kept coming back to his need for an exit strategy. He said he couldn't afford to sell out and quit right now, but knew he needed to get started on a plan to facilitate an exit when the time comes.
Whether he was really going to try to sell his business or not, this owner wanted to start on a strategy to get it ready to sell by setting some rapid growth goals and beginning at once to take action to achieve them.
Setting rapid growth goals
Setting goals is a tricky thing. If you set a goal so high it is unachievable, you'll quickly get frustrated and abandon it. If you set it so low it doesn't present a significant growth challenge, it will fail to motivate you or your people to stretch farther and achieve dramatic results.
A while back I wrote an article entitled, "Dare to Double Your Business Now." (Contact me for a reprint if you haven't seen it). The idea was to set an extremely challenging growth target that would require making major changes in the business if it was achieved. It could mean doubling personnel and payroll. It could require doubling work space and equipment. And it could call for a major capital investment to make it all happen. But it does present a clearly defined target that everyone can understand. Even coming close to achieving this goal would be a major forward leap for any business!
Some important goal-setting rules
My article on daring to double your business is based primarily on two rules: goals must be measurable and specific and goals must be stated in the most visible terms available. Choosing a specific amount like "doubling" provides an easily stated target for which to shoot. It also requires a shop owner to determine exactly where his or her business is today in order to know when "doubling" targets have been reached.
A third rule states: goals must contain a deadline. It's likely that most shop owners actually have doubled their business over the past ten, twenty or thirty years. But how long would it take to double it again? A challenging goal would set a time frame of a year, or even three to five years.
Some doubling guidelines
The following questions take an extreme viewpoint, but if modified to fit your shop's circumstances, they may be able to provide some beginning growth targets:
A. Doubling the value of your business to a buyer
1. What is the approximate, current value of your total business now?
2. What would it take to double the value of your total business in the eyes of a buyer?
B. Job volume, size & profitability
1. What is your current average profit per job?
2. What would it take to double your profit per job?
3. What is your current average volume of jobs per month?
4. What would it take to double your volume of jobs per month?
5. What is the average total dollar amount per job?
6. What would it take to double your average total dollar amount per job?
C. Operating cost reduction
1. What is your current payroll cost per employee?
2. How could you double the productivity per employee without increasing the cost?
3. What is your current materials cost per job?
4. Is there a way you could cut your materials cost per job in half without sacrificing quality? If so, how?
5. What is your current facility overhead cost?
6. How could you cut your current facility overhead cost in half?
D. Operating time reduction
1. How much time do you spend on paperwork now?
2. What would it take to cut your paperwork time in half?
3. How much time do you spend out promoting more jobs?
4. What would it take to double the time you spend out soliciting more business?
5. How much recreational time do you spend away from the shop each month?
6. What would it take to double your recreational time each month?
E. Appearance impact
1. On a scale of one-to-ten, how would you rate the appearance of your shop today?
2. What would it take to double the appearance impact of your shop?
3. On a scale of one-to-ten, how would you rate the appearance of your shop's work flow?
4. What would it take to double the appearance impact of your shop's work flow by marking work spaces, putting up identifying signs, etc.?
5. What do you imagine it costs you to deliver a vehicle late? In car rental tab? In insurance loss of confidence? In extra pay?
6. What would it take to double the accuracy of your estimated delivery times?
F. Retirement targets
1. What percent of your net profit do you currently set aside for your retirement?
2. What would it take to double the amount you set aside for retirement each month?
Few people are satisfied with slow progress, and yet the fact is most progress is slow. If you're learning a foreign language and can add a dozen new words a week, you should be fairly well satisfied. In just a few months you would have mastered hundreds of new words. But when we're talking about marketing growth, many shop owners expect a rapid increase in jobs coming in the door. The fact is, when growth occurs too fast it can kill a business. Quality can decline and increased capital demands can eat up cash flow.
Studies by Harvard Business School have determined that any statistic, consistently measured, will increase by an average of 15%. A shop that introduces an effective system to monitor marketing, sales, estimate accuracy and profitability, job-scheduling, parts ordering, receiving, tracking, returns and discounts, plus customer satisfaction and referrals, could result in a 15% improvement in many of these areas. A 15% increase in seven of these areas measured would total an increase of 105%, more than double!
Some estimates of customer dissatisfaction have found that an unhappy customer tells as many as 26 people, while satisfied customers rarely refer more than one or two people. If you can double customer satisfaction so that - on average - every customer refers one additional job, that alone could double your gross profit!
Targeting specific gains
When I take on a consulting assignment to help a shop grow, I guarantee that the shop will gain double my fee in net profit from a specified area during a specific part of the contracted time. If it doesn't double (by reliable measurement), I'll refund the fee. Actually my target would be at least ten times my fee, but I couldn't guarantee it. There are a number of areas in which my strategies may enable a shop to double the fee paid to me in a given month:
1. Ten new prospective customers come in the door. Assuming one in ten usually becomes a customer, a typical job will net more than twice my fee.
2. A suggested procedure brings in a prior customer who hadn't planned to come in, with a job that would net twice my fee or more.
3. A suggested procedure is used to stimulate a referral by a prior customer, local mechanic, employee, or someone who otherwise would not have provided a referral, resulting in a job that netted at least twice my fee.
4. A suggested procedure or communication results in a new dealership, fleet, or DRP relationship. Or in other direct insurance, agent, adjuster, or commercial referrals. Needless to say, any of these would result in many times my fee.
Three simple rules to grow by
My approach to marketing is based on just three basic principles.
1. Keeping in communication with business referral sources is key to keeping referrals and business coming.
2. Communication must be clear, concise, continual and fresh to keep people's attention.
3. Every possible source of business must be included in this on-going, continual communication activity. For most shops, this would include agents, DRP directors, dealership principals, local commercial contacts, possibly fleet managers and definitely prior customers.
These three basic rules, if followed meticulously, will keep nearly any shop growing - and perhaps even doubling.
Tom Franklin has been a sales and marketing representative and consultant for forty years and is the author of the books, "Business Battlefield Marketing for Body Shops," "Tom Franklin's Top 40 Marketing Tactics for Body Shops," and "Strategies for Greater Body Shop Growth." His marketing company now provides marketing solutions and services for body shops and other businesses. He can be reached for questions or comments at (323) 871-6862, by fax at (323) 465-2228, or by E-Mail: firstname.lastname@example.org.