Is your business ordinary, average or upper quartile?

How is the business doing? What do you say when someone asks, “How did 2018 come out”? And if you say we did this or this happened and they ask “Why” that happened, do you know the answer? I unfortunately believe that a large percentage of CEO’s could not answer that question knowing exactly what happened.

I would expect that type of response from one of the run-of-the-mill equipment dealers that put forth the AVERAGE numbers we find in the annual financial reports covering the industry. You know how some of those reports work…. we have the upper quartile (top 25%) and in some cases the lower quartile (lowest 25%) and then everybody else.

GUESS WHAT? A BUSINESS CANNOT AFFORD TO BE “EVERYBODY ELSE” IN THIS DAY AND AGE, AND DON’T HAVE TO BE WHEN THERE IS SO MUCH HELP AVAILABLE TO MOVE THEM INTO THE UPPER QUARTILE.

If you are average you will continue to fall behind as you competitors in the upper quartile eat your lunch with better pricing because they are more efficient and have lowered costs, they make doing business with them easy and convenient and can hire the better people because they can earn more working there. Tough to compete against.

And if you happened to fall into the lowest category you need to move fast or get ready to sell what you have to a strategic buyer who knows your industry or is a competitor why you still have something to sell. If you don’t operating results will only get worse, eventually forcing the owner to take a 50% discount by selling a distressed company as opposed to highly profitable operation. It is no secret that the upper quartile folks are buying up their smaller competitors at a brisk pace. Number 1, it is good time to sell. Number 2, Buyers have access to money to do the deals. Number 3, the latest tax bill helps both sides of the transaction. If you are a potential seller don’t wait to make a move!

Are you one of those business leaders who really feel they don’t know what goes on in their domain, are not sure your management team knows it any better and want to step up their game, but at the same time want to insure they will get a bank for their buck.

Well, we can get you there but there is one very important segment of the program that only you, Mr. CEO, can accomplish. Can you guess what that is? And the answer is.

YOU must lead the charge. YOU must attend EVERY program or meeting. YOU must involve your CFO and other DEPT HEADS. This is the only way you will know where you need to be and can discuss these changes with other executives who have been through a program resulting in better operating income and cash flow.

IF YOU CANNOT COMMIT TO THIS TIME OBLIGATION …. SELL THE COMPANY.

If you believe I am being a little harsh here I don’t believe I am. Because if the CEO is not leading the effort the company will never reach the improvement levels needed to make the company more financially viable.

Here are some steps you can take to get on the right track.

  • Join MHEDA and actively participate in the DiSC Report (that means submit your data on an annual basis). If you cannot do this on a timely basis you are in big trouble.
  • Participate in MHEDA convention and programs. Talk to other attendees. Meet with your OEMS and ask for their assessment of your operation compared to the upper quartile firms. Record the conversations or take notes.
  • Take your CFO along to these meetings and discuss info and data you would like to start seeing on a monthly basis that will help you improve operating results.
  • You and your department heads should attend MHEDA programs addressing parts, service, rental, sales and other meaningful topics.
  • Read this publication and others like it. There is a ton of good free information to consider. And don’t hesitate to give the authors a call if you have questions. We love talking with you.
  • Make it a point to review other dealer-oriented industries …. construction equipment dealers, rental companies, leasing companies, auto dealers and whoever else you can find. I guarantee you will learn something you can apply to your business when you do.

Ok, that is Phase 1.  The time commitment is a must and the cost are reasonable.

The next step up is to join one of the 20 Groups presented by Bob Currie or Walter McDonald. Same time commitment for three two-day meetings per year where you will have to provide quarterly financial data which is compared to others in the group. You are also expected to ACTIVELY PARTICIPATE IN THE DISCUSSIONS AND SHARE PERSONAL RESULTS AND IMPROVEMENTS WITH THE GROUP. You could also be called upon to produce new ideas to the group at each meeting, most of which are viable options to consider. The BOTTOM LINE here is that if you don’t fully cover the cost the meeting by the end of Day 1 you are not paying attention.

Side Note: Walter McDonald put together a set of his training materials in a two or three volume set you can get on Amazon. Cost is very reasonable.

I have personally witnessed and participated and monitored some of these group meetings and can attest that the CEO’s attend each meeting, actively participate in the discussions and put a lot of effort into the “new Ideas” segment of the program. How amazing is it that all the companies represented by these attendees are in the Upper Quartile regarding financial results? Hmmmm.

This Phase 2 program is obviously more expensive …. airfare, three nights of hotel and other travel costs plus the cost of the program. The costs are typically totaled and spread among the members after each meeting. But when you have goals for each department assigned to your company, can compare your data against others in your group, have the ability to dive into how the others are achieving the results they are getting, listen to how others are improving their business and generally have the ability to call every one of these members when you have questions of problems to deal with how can you not improve your bottom line and cash flow. There are NO competitors in a group. Not allowed. So, you can freely discuss your problems.

That is Phase 2……you can get a lot out of Phase 1 approach, but going over your goals and results on a quarterly basis knowing 15 other folks are going to question your results and what you are doing kind of puts Phase 2 at the front of the class if you have any urgency in righting the ship.

There is a Phase 3…. which I don’t have time for this month.  Kind of a middle of the road approach where you can stay put and get some outside help. We’ll get to it next month.

 

About the columnist:

Garry Bartecki is a CPA MBA with GB Financial Services LLC. E-mail [email protected] to contact Garry.

Author: Garry Bartecki

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