Page 6 - Demo

6 | March 2024 Slippery Rock Gazette
Training & EducaTion
How Effective is Your Business Strategy?
Economic signals are all over the map. Interest rates remain high, housing starts are down, yet the stock market is setting records. Most of the prognosticators who gaze into their crystal balls for a living are still forecast- ing a slowdown for the rest of this year.
All this uncertainty makes it difficult to make effective business plans. Do you plan for a weak market, or do you plan for a strong market?
Would you rather hope the mar- ket gets stronger or would you rather have a plan for whatever this economy throws at you?
When I ask this question, many shop owners will say they have prepared for a downturn by paying off all their loans and banking cash. That’s a solid strategy – if you’ve already completed implemen- tation of it. Unfortunately, it’s pretty late in the game to start implementing that strategy.
One of the challenges with using only this approach is predicting how long any downturn will last and how much cash you will need to weather the storm. For this strategy to really work, it also needs some proactive components. Here are a few to consider.
Raise prices now. The mechanic’s adage of ‘tighten it until it strips, then back it off a quarter turn’ applies. Intentionally increase pricing until your customers start to really complain, then back off a little. All your operating costs are going up, as are your material costs. (A quick check on your pricing structure: For retail jobs, your material cost for the job – including waste – should run about 30% of the sales price. If it is higher, you probably haven’t been keeping up with the increase in your slab prices.)
Once inflation is no longer increasing, your customers will automatically push back on price increases. Increase prices now while you still can.
Know your leading indicators. If your first indication of a slowdown in volume
Ed Young
Fabricator’s Business Coach
is a decrease in orders, you’ll find yourself constantly behind the curve and playing catch-up to current market conditions. To manage your business effectively (in either a downturn or an upturn), you need earlier indicators of business volume.
Quote volume obviously precedes order volume. How is your quote volume trending? How is your conversion ratio of quotes to orders trending? Posting this data where employees can see it keeps them from having emotional reactions based on perception – and allows you to operate based on facts.
Inbound calls and showroom traffic pre- cede quotes. How are those trending? Are you using a CRM (customer relationship manager software) to track:
• Social media engagement
• Web site traffic
• How quickly your salespeople respond
to inquiries
• How quickly your salespeople turn
around quote requests
• Trends for all the above
Think of these leading indicators as an early warning system – radar – for your business. It will tell you what business changes are headed your way so you can proactively deal with those changes.
Quantify your intuition. You have addi- tional fees for full height splashes, raised bar tops, mitered edges, and mitered full drop legs because you know they take lon- ger to fabricate and install. But have you measured the true impact of those factors on your profitability?
You know that some K&Bs and some contractors are more challenging to deal with than others and they probably impact your profits accordingly. But have you quantified their impact on your profitabil- ity relative to your other customers?
You know that some market seg- ments generate more profit for you than
others. Have you quantified that impact, so emotion and your personal desires don’t color your decisions?
Analyzing metrics like Throughput Dollars ($T) as a percentage of sales is a start but, to really get at the heart of the matter, analyze $T per install hour for your market segments, your kitchen configura- tions, your materials, and your B2B cus- tomers. Determine what factors drive that variation and compare that impact to how fast you burn cash. This will quantify your business intuition to help you make sound business decisions.
Invest in good tools. Anything you can afford to purchase and implement that will allow you to produce more kitch- ens with the same labor or less labor and/ or improves your quality is an automatic ‘do it’. All digital tools fall in this cate- gory: digital templating, CNC equipment, tool setters for CNCs, etcetera. So does material handling equipment like cranes and powered install carts. Focus on tools
that help break recurring bottlenecks to the flow of orders through the entire busi- ness – including the front office. Don’t forget to upgrade your company’s com- puter systems as well.
Anything that improves the customer’s experience falls in this category. Take advantage of technology to automati- cally communicate the status of sales calls, templater arrival, and install crew schedules to your customers. This helps them feel safe and cared for. Invest in cus- tomer service training for customer-fac- ing employees – including templaters and installers. Invest in upgrading the selling skills of your salespeople.
Build your marketing plan now.
Too many shops rely solely on word-of- mouth marketing. While nothing beats a solid customer referral, you need a way to effectively leverage those referrals. This calls for a solid marketing plan.
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