Filed under: Business Growth, Pittsburgh, Profitable Growth, Uncategorized
As a growth consultant for small businesses, I’ve enjoyed many opportunities to see how various small businesses function, especially those that have operated for a number of years. In an age of understaffed companies and conflicting and competing demands, most of these companies are so busy helping their customers that they don’t take the time to help themselves.
They tend to lose sight of what I call the extraordinary that lies at the heart of the ordinary in their operations–the characteristics that make them special and unique. One such company in Butler County is W.K. Thomas.
The president of this company lacked a formal marketing program and realized that traditional, relationship selling would not get him to where he wanted to be—in the scarce space of marketing and sales in their respective businesses. Now, he’s changing his company to achieve that.
Thus far in our work together, he’s focused on expanding his values and defining and honing what I call his individual Best and Highest Use®. Best is what he loves to do. Highest is what he does really well. And Use relates to what his customers value and are willing to pay for.
Under the leadership of Brent Thomas, W. K. Thomas & Associates provides pre-engineered steel building and construction services to the commercial, industrial, community, and religious markets throughout Western Pennsylvania. Brent’s father, Bill, now Vice President, established W.K. Thomas in 1974 as a custom-home builder and general contractor. Since then, the company has remained a privately owned, family company.
Other firms rely heavily on the service offerings of project management and estimating as commodities to drive business forward. They end up competing in a market where bottom dollar pricing and the resulting low-quality construction become the norm. But Brent Thomas is linking the brand of W.K. Thomas to pre-engineered steel buildings as the company’s big differentiator and is driving revenues up. His company is growing a reputation in Butler County as the go-to company for these types of buildings.
“I’ve stepped outside of being jack of all trades,” says Thomas, “I’m focusing on pre-engineered steel buildings, which is our Best and Highest Use, have taken on more responsibility for sales, and I’m reorganizing our team to help energize this new direction.”
When I began working with Brent Thomas, he had a strong, well-established business with great potential for growth and wanted to take his company to the next level. What made sense for him was my ability to find the extraordinary within the ordinary of his company. My approach has been to find the characteristics that make him special and different from his competitors, and to cultivate these aspects into exciting opportunities to grow his business.
Working with him and his customers has led me to understand his product lines, how they add value, and how they develop special relationships with his customers, whose feedback is critical to our endeavor.
The upshot is that now W.K. Thomas is becoming more aggressive in proclaiming its value and more consistently educating its customers about what it can do to help them. Thus far, we’ve focused on expanding Brent’s values and defining and honing his individual Best and Highest Use®.
Throughout my years of consulting with businesses like W.K. Thomas, I’ve deployed this approach to help more than 430 businesses owners identify the specific markets that’s right for them and their companies. This has had a $450-million impact on the economy.
Best and Highest Use also immunizes companies against the “Be All Things to All People” disease. This disease is as common as a cold, but it’s as deadly as the plague for small businesses.
When business owners fail to target specific markets in this way, a number of consequences occur, all of which are bad. Their companies aren’t special. They’re mediocre, forgettable, or worse. People can’t refer customers to them. Their companies attract unqualified prospects and waste resources on prospects who could care less about their offers. This, in turn, diminishes their efforts with regard to prospects who do.
What’s more, best use helps business owners to resolve the greatest pain or create the greatest opportunity for a narrow slice of a market. This creates a crucial intersection for them between their companies, their Best and Highest Use, and the needs of their customers.
Over time, I’ve had the privilege of learning, using, and teaching a variety of growth tools for organizations. We’ve used a variety of names for these processes, including strategic planning, management by objectives, sales management, and incentive compensation. Too often, these systems steamroller over the interests of the users. The fact is that old-fashioned, autocratic tools just don’t work anymore.
More than a few times, I’ve had people challenge my concept of Best and Highest Use, saying that it’s just another term for distinctive competence, one of the buzz words that periodically make the rounds of corporations and MBA programs. In one way, they’re right. Best and Highest Use is essentially distinctive competence for business owners. The difference – and it’s a large one –is that although distinctive competence speaks clinically of skill sets and marketplace advantages, Best and Highest Use involves an owner’s emotions, goals, and personality.
One concept I hear kicked around is the term, best practices. But this assumes that all firms start out and grow and stay completely equal. To center your business on best practices is to deny, ignore, and disrespect your Best and Highest Use. How can you ever tell if you are better or worse than you should be if you only judge yourself on the basis of the lowest, common denominator of other companies?
Working together, Brent Thomas and I continue to focus on his individual Best and Highest Use to translate new customer demand into substantial, dramatic growth and confidence in his abilities.
In the short and medium term, we’re tailoring initiatives designed to achieve profitable sales growth. At the same time, this company leader is experiencing a renewed excitement and passion for his business. At a time of economic hardships when competitors are pulling back or taking cover, their passion and excitement is giving him confidence to make it work.
As we reinforce the abilities of W.K. Thomas to deliver higher value at lower cost, we’re decommoditizing the company.
This is not to say it’s easy. For one thing, Brent has had to break old habits. That’s difficult. But my goal is to push him out of his comfort zone in a way that causes willingness to raise new behaviors while preventing him from making ultra-risky, bet-the-company decisions like introducing price changes to gain market share, hiring non-producing sales people, or getting rid of a sales force.
As I work with companies like his that have enjoyed years of success, I’ve enabled them to make course corrections a step at a time. The end result has been that they’ve sharpened their views on the kinds of businesses they want, the kinds of services they deliver, and they’ve stopped trying to be all things to all people. These are hard choices that emerge from recognizing that everything they may be involved in is not a business.
Andy Birol is the Founder and President of Birol Growth Consulting, www.andybirol.com. You can reach him at 412-973-2080 or at firstname.lastname@example.org.
Filed under: Business Growth, Profitable Growth, Uncategorized
Even in an improving economy, why does the contracting industry still feel like the last frontier? As long as financing stays unpredictable, customers pay late and subcontractors/tradesmen slip up, does running your business seem like a series of showdowns at the OK Corral? After helping dozens of owners in the building trades, I’m clear that formal planning and forecasting don’t work in the face of erratic weather, desperate bidding, and poor project management. But good contractors survive. And a few have learned how to adapt and actually thrive by creating scarce capabilities and unique services. And some builders have done it so well that they have, in a sense become “The Only Sheriffs in Their Towns” in the “Wild West of Contracting.”
Recently I personally met, spoke with and asked over 20 PA-based contractors what they needed to do to succeed in the next two years. They said three factors mattered most:
1. Competitive estimating/pricing
2. Quality work
3. Great project management.
But they agreed that these factors are not a strategy for long term success. In the short run, every contractor may survive by delivering quality work on time and on budget. But as labor and material costs grow and credit stays tight, only the largest or cheapest firms may succeed over time by doing more and charging less.
So what is the answer? Focus, perform scarce services, and move with the market. Here are three “Wild West” strategies I’ve helped my contracting clients invent, develop, and implement.
1. Focus on your Best and Highest Use®. WK Thomas Construction has focused on being a leader in building Butler® pre-engineered steel buildings.
2. Invent and Perform Scarce Services. Menard USA is a design-build specialty geotechnical contractor offering expertise on ground improvement for sites with poor soil.
3. Move as the market moves. FlorLine Group® is expert in the design and application of industrial floor, wall and ceiling coatings for electrostatic and other regulated (FDA) environments.
So which strategy will you take to become the only sheriff in your own town? The first step is to decide which of your differentiated skills, expertise and services you can charge more for to generate better margins. Although new products, markets and technologies are hard to develop and must be constantly protected from copycat competitors, they will turn your “Wild West” into looking less like “F Troop” and more like “Bonanza!”
Andy © Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners create profitable growth by growing their Best and Highest Use®. Andy can be reached at (412) 973 2080, email@example.com or www.profitablegrowth.com
Filed under: Business Growth, Profitable Growth, Top Line Growth, Uncategorized
If your business outsources work to, or does work for another business, you understand contracting and subcontracting. But no industry knows contracting better than the one that invented it: the building trades. Last week, I was invited to lead a workshop/meeting for the Master Builders Association. As part of the program, I gave this hardened group of building- trade executives, those next in line to run their family businesses, an exercise whose results reveal valuable insights for any business.
Each participant was given the following key success factors that dozens of my building-trade clients have taught me matter most. The group was asked to rank the ones they felt were most critical to master in the next two years. Here are their ranked responses which could apply to your business too!
|TO SUCCEED AS A (SUB) CONTRACTOR YOU MUST:||Ranked as most important to master in next two years|
|Produce quality work||Second|
|Have a competitive price||First|
|Complete work on time||Twelfth|
|Use right equipment & technology||Tenth|
|Have great project scheduling / management||Seventh|
|Have great first line supervision||Ninth|
|Sell incoming work to match available labor||Thirteenth|
|Be good at job tracking and forecasting||Eleventh|
|Be good at estimating and job costing||Third|
What conclusions can we draw from these data and the comments of the group?
The (sub) contracting business remains a tough one where providing top quality at a competitive price is the key success factor.
- Managing projects, materials and labor is perceived as the next most important factor.
- The group is concerned that subcontractors who don’t manage these key skills will likely go out of business in the face of reduced project-funding sources and increased competition.
- In the face of government cutbacks, the sector is counting on private projects to take up the slack.
- The group understands that differentiated skills and services, like value-engineered solutions and LEED certifications produce better margins. Although they are hard to develop and protect from copycat competitors, new products, markets and technologies have historically ensured profitable growth for the industry.
My thanks to Brett Pitcairn of PJ Dick Construction and Jon O’Brien of the MBA for giving me the opportunity to present to the Master Builders Association.
Filed under: Business Growth, Profitable Growth, Top Line Growth, Uncategorized
Just as predictably as the Times Square ball will drop, on New Year’s Eve, both consumers and business owners will make resolutions. Consumers will resolve to diet and exercise and business owners to hunker down and work on their business, wealth and lifestyle. Too often, the results for both consumers and business owners turn out the same:
January – March: Consumers starts personal regimen. Owner pushes him/herself and staff to work harder in the business to get better results.
April-June: Consumer loses some weight and prepares for warm weather. Business owner gets frustrated as current level of activity isn’t generating better results. Feels like Groundhog Day.
July-September: Distractions of summer vacations and increased activity distract both the consumer and business owner alike from their missions of getting in better shape.
October-December: Consumers get very busy going back to work, school and preparing for the holidays. Business works even harder to “save the year” by having a great 4th Quarter.
And then it’s New Year’s Eve again! Time for new resolutions!
I am no role model for fixing consumer behavior, but I have seen the following work for business owners who are ready to break out of their cycles:
Whenever your recession (and your customers’) started and regardless of whether your business is a leading or lagging indicator of a recession, it doesn’t matter when you’re in the middle of one. For many of us coping with this recession has been a lot like going through the four phases of loss namely denial, anger, self pity and acceptance. In this era, many of us are moving into acceptance of our new reality and are ready to take steps to make the best of our gifts and blessings. The more we reflect on the last few decades, the more we realize how much better and smarter we could have been when times were easier and now know that getting ever better and smarter is the difference between success and failure. In our recession there seems to be a fine line between success and failure. Success may be defined as not failing. And failure can come from simply or deviating from success. As we consider our circumstances and recognize that our business lives must go on, what can we do to grow and save our businesses during these times?
Here are three areas you need to triage, four areas where you should respond and three strategies on how to profit during these times.
Three Areas You Need To Triage.
Triage, when ER doctors and nurses determine who lives, who dies and who will be healed later, is exactly the right approach to take in your business as do in their jobs. Instead of patients you will be triaging your customers, projects and cash.
1. Triage your customer relationships.
o It’s going to be critical to decide which customers you can keep, which ones you need to renegotiate terms with.
o Fire your unprofitable or difficult customers now and use great discretion in choosing the prospects to pursue. Someone else may have fired them first.
o Most companies start first by providing extra value and service to their incumbent customers. During these times, their loyalty and fear of switching will keep them close to you if you stay close to them.
2. Reevaluate ongoing projects.
o Take a hard look at what you’re working on. Kill any project with an unclear payback or one, which will consume more resources than will plausibly make in the next 36 months.
o Restructure any project that’s critical but has no clear payback, accountabilities or resources.
o Prioritize and focus on completing any project with the ability to enhance revenue, reduce costs or protect wealth.
3. Manage your cash.
o With liquidity likely to be scarce at best, hoard what you have. Use cash as a reward for vendors, employees and others who are sacrificing for you or your goals.
o Use your cash or lack of it as a weapon in dealing with companies and customers who rely on you and previously expected you to finance receivables.
Four areas where you should respond.
Once you have triaged your customers, projects and cash, look to four areas where you can respond to your new reality. These are:
1. Price for profit and to avoid loss.
o Price your products and services in terms of the value they not only provide to your customers but how they help your customer’s customers profit. Learn where and how your products make others money and align your pricing with theirs.
o Where you must make sizable investments in raw materials, ensure your pricing terms allow you to recoup your investment as soon as you’ve made it.
o Reward your customer’s liquidity with favorable pricing. Those who can pay you up front deserve discounts.
o Finally, use your pricing to protect yourself from those who exploit you. Immediately raise prices on customers who pay slowly. Create collection terms for poor payment just as you would offer good terms for fast payment.
2. Manage your credit furiously.
o Do what you can to get more credit. If you can open a second line or other source of credit, do so even at a price you would not normally pay, especially if these are from confidential or “angel” sources.
o Use your credit prudently. Don’t assume you need to finance everything yourself. Get creative and aggressive in what you ask others to carry and fund.
o Thirdly, use other people’s money wherever possible. Many aggressive sellers and bargain hunters may have credit you can use in the course of doing business with them.
3. Lead decisively.
o Show your confidence in all you say and do. While you may not feel it, your optimism, confidence and conviction will be a beacon of hope for those who are more scared than you are.
o Motivate your vendors, staff and customers to stay committed, keep their promises and take the same risks you are in an anticipation of better times and the promise of deferred rewards.
o When times are tough, show your stoicism in the face of bad news and inevitable hiccups.
o Demonstrate balance in your short-term pursuit of survival and your long-term perspective for better times and deferred rewards.
4. Reinforce your Best and Highest Use®.
o Ensure that you and your company are focused on what you like doing, you are good at doing and your marketplace values you for doing.
o Bring as much value and enthusiasm to getting better and doing better at what you focus on.
o Take heart in knowing you are very good at what you do and this is a true advantage in these times where impostors are exposed, pretenders prove incapable and amateurs just give up.
Three strategies on how to profit.
After you have triaged your business and responded in four areas, turn your focus to new strategies to profit now and over time:
1. Take market share.
o Understand switching costs for the prospects you are trying to close. Make it easy for them to move their business to you and your superior value.
o Buy up your rivals for pennies on the dollar. Many companies today do not have enough sales to cover their overhead. Better yet, just buy the companies’ customers without the overhead of their failed companies.
o Grow your share of your existing customers. If you are trusted and invaluable, then ask for more of their business. Be quick to respond if another supplier stumbles, or is on the ropes.
2. Sell new value.
o Instead of selling just your product or service, take responsibility for your customer’s success and outcomes. Offer to warranty or insure that their success will come from your product or service.
o Recast your value proposition if your customers’ needs are changing. If so, rethink how you get paid, how you package your services and how you price your products.
o Realize you are going to work harder, spend more time, and possibly get paid less for serving the same customers. Consider it an investment in the future.
3. Invest for the recovery.
o Now is a great time for buying services and raw materials at a discount. If you can, invest now at a fraction of what it may cost to buy what you need when the economy picks up.
o With sales down, you probably can find extra time to work on the future. Take advantage of not being busy and get busy building your next success.
o Finally, as you come out of denial and self pity, push yourself into actions that will ensure your success and preserve your survival. Work harder and more decisively while your competitors are whining and paralyzed.
Our next year will continue to be hard as credit remains tight, new sectors of the economy are impacted, and the country adjusts to our new reality. You can grow your business during this recession if you triage, respond and develop strategies to profit. As the small guys in a world of goliaths, the recovery is largely in our hands as it always has been and will surely be again.
While you know how your company creates profitable growth, do others?
In spite of all your meetings, strategic planning efforts and company mission statements, are you sure your constituents get how your firm makes money?
Are all your internal departments making, spending and saving money towards the same goal? If not, many inside and outside your company may be squandering your resources or working at cross purposes.
Here are the 10 ways to tell if your company’s plan profitable growth is a secret.
- Few of your management team and none of your employees understand your company’s business model or know how your business makes money.
When asked, they revert to talking about how long you’ve been in business as proof that legacy means current success.
- Your customers do not know why you cost more than the competition.
After you explain all the disadvantages of buying competitors don’t provide, your customers still don’t acknowledge your added value.
- Even you’re not sure what it costs you to find, keep or grow customers.
In response to such questions, you find yourself dieseling, much like a jalopy that continues to sputter after the key is out of the ignition.
- When asked by a reporter which market segments offer your firm the best opportunities for future growth, you don’t answer them, not because it’s a secret but because you aren’t sure.
- Your sales force blames your high prices for not hitting their sales quotas while they brag about the excellent service they provide.
- Your compensation plan doesn’t reward your executives for achieving your company’s profitable growth.
Instead of planning to spend their bonus on a trip to Hawaii, you find out they’re booking a weekend in Topeka and not taking their kids.
- One of your vendors suggests that if you dropped your prices you could sell a lot more of your products and thus buy more from her.
Clearly they don’t see the value your firm is adding to what they are supplying you.
- Your closest friends give you bad or unprofitable referrals.
At a recent get-together, your friend tells you about meeting three of your most desirable prospects. But he didn’t think you would want to pursue selling them.
- Your spouse cannot explain why your company is the premium provider.
When asked by her or his friends to describe why your firm is so expensive, she or he turns to you to explain it correctly. And when you encourage her to do it alone, you constantly interrupt her to correct his or her mistakes.
- The reasons your customers say they buy from you do not match the reasons your sales force says sells your customers.
As the old saying goes, people don’t buy shovels, they buy holes. Sadly, you worry your customers are asking for premium swimming pools and your sales reps are selling low-cost excavations.
While stories of disconnected companies can be hilarious, they are not funny when they are about yours. When your plan for profitable growth is clear to your team, their actions are more likely to contribute to your objectives.
Convey how your company will achieve profitable growth and make sure everyone around you understands.
Filed under: Business Growth, Profitable Growth, Top Line Growth
While financial gamers, schemes and scams have enabled many companies to avoid either profitable growth or a sale for years…
… ultimately one of these options is inevitable.
- A company that is profitably growing is controlled by passionately committed owners and investors.
Their firm is financially and operationally self-sufficient. There is no need to merge or look for investors. Its leaders can reduce its credit line and pay down outstanding loans. The company has customers who are happy to pay for its valuable products or services. Over time, the company will build up retained earnings and become a creator of wealth. As long as its owners are confident and passionate they should never think of giving up their independence in running it or cashing out. Life is good!
- A company that is not growing profitably has flat or declining sales.
Its costs and expenses are fixed or rising and it starts to lose money. The company begins to consume more cash than it generates. Owner, banks or investors have to subsidize the company through credit or by tapping any retained earnings. These leaders lose passion for their business as it is no longer self-sufficient. Clearly, its customers cannot or will not pay enough for the firm to delivery its products and services. First, the company runs out of cash, then out of credit and finally must be sold.
There are only two buyers for a company that is not profitably growing:
- New owners and investors with ideas, cash and passion to return the company to profitable growth.
- Bankruptcy trustees who sell the company for whatever they can to pay creditors pennies on the dollar.
So companies either profitably grow or they are sold.
What’s it going to be for your company? Do you agree or disagree?
Filed under: Business Growth, Profitable Growth, Top Line Growth
Before the financial crisis, most businesses could coast along and rely on their credit lines to make up for shortfalls in sales.
“Good” customers could be subsidized and customers who didn’t pay or went under could be ignored by just borrowing more cash. For the firm, slumping quarterly revenues and rising expenses could be carried forward by financial wizardry and leveraging a balance sheet.
While the lessons of doing business without credit and cutting expenses to the bone have been learned, how can one grow a business back to where it was and forward after the financial crisis? Without fads like buyouts, rollups and ESOPs, an owner, financier or organization should return to the oldest source of creating growth in the book. Sell more products and services and do so at a profit.
Profitable sales means focusing on:
- Higher gross margins from differentiating your value and de-commoditizing your products and services profitably
- Knowing that every sale you make is profitable by customer, order item or services
- Managing your balance sheet for liquidity instead of credit where the biggest assets are customers’ predictable purchases.
- Creating a wealthy company that can be sold for cash and secure the lifestyle of its owners now and later.
Profitable Growth is not a fad, or just a program to get by in the short term, but a way thinking about your business, investment or organization. It starts with knowing who is paying you for what value and continuously working to repeat this. It is a pay-as-you-go approach to growing your business that reduces dependence on borrowing money, and increases the wealth of a company and the security of its owners and all who rely on it.
Whether your business has major growth or returning to growth in its plans, this blog will focus on the tools, techniques and real-world examples for creating Profitable Growth!