International Door & Operator Industry

JAN-FEB 2018

Garage door industry magazine for garage door dealers, garage door manufacturers, garage door distributors, garage door installers, loading docks, garage door operators and openers, gates, and tools for the door industry.

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Page 28 of 142

26 International Door & Operator Industry™ MANAGEMENT Continued from page 25 • Related to employment rates above, note any quick increases in unemployment claims, particularly among construction workers, factory employment and other non- governmental jobs. • A major change in world politics such as an escalation in the current Asian Pacific concern, a blow-up in or among middle eastern countries or a serious political disruption in the European Union would cause economic concern. • Any major disruption in American buying patterns. • A major bank failure precipitating a financial or banking crisis. Obviously, world and national incidents are beyond a dealer's control. However, being aware of these changes and understanding how they might negatively affect your local economy is within your control and your responsibility. Managers must be on the lookout for these signs of change. Being vigilant is critical because a strong economy like most enjoy today often causes good managers to become lax. Some less than vigilant managers, when business is terrific, see no reason to rock the boat. Strong managers constantly study their business, in good times and bad, to look for ways to improve productivity, sales, gross margin, reduce expenses and therefore improve real profitability. Here are several areas for a dealership manage to analyze that might cause warning flags to raise and force management to take corrective action: A decline in employee productivity – This is not limited to just field personnel, but rather should include a study of productivity for all employees. • A decline in the sales-per-sales person productivity of a specific sales person or the entire sales force – For example, if the average sales per sales person was $800,000, but this measure noticeably changes, it is time to determine the reason for this decline and take action to correct the problem. Has competition gotten stronger? Has expected pricing from competitors suddenly gotten sharper. Has your main supplier become less competitive? Have one or more of your salesmen lost their drive or become lackadaisical? If any one cause of declining sales is creating the sales, fix it now. Don't wait. Replace the non-productive sales person, secure better pricing from you supplier, or find a new supplier. Don't put off the action needed to fix the problem. • Do you have non-productive office staff who are draining dollars away from the firm? Do you have non-productive employees that were hired, not for a valid job, but rather to solve a family issue? If so, with an impending downturn, this may become an unacceptable expense. Bite the bullet and get rid of non-productive employees. When you finally rid the firm of un-productive employees, the morale of the remaining employees soars. • Watch for productivity declines in formerly very productive field employees. Accurately cost labor in every job. Verify that an adequate amount of work is being scheduled to guarantee high productivity. Field employees cannot perform to high productivity standards if an insufficient work load has not been scheduled. If the productivity issue is determined to be lack of effort by an employee, quickly result the issue, or terminate the employee. An under motivated employee, unless successfully disciplines, can poison the enthusiasm of other field employees. Remember, field productivity is a function of the sales segment. While a percentage of totally burden labor (wages plus fringes) versus net sales goal of labor for a residential installer might be as low as eleven percent (11%) it would be acceptable for a residential service tech's labor goal to be at twenty-four percent (24%). Watch the numbers – Without fail, determining declining productivity or a decline in sales, or a decline in gross margin, or increase in expenses, or a reduction in profitability require careful analysis of the numbers. Compare month-to-month results with last year's numbers and with the previous month's numbers. Understanding the seasonality of your business, make sure the month-over- month or quarter-over-quarter results make sense. Develop a template that allows you to logically analyze your numbers, possibly like the charts below. Remember, looking only at total sales is a poor measure of how your firm is doing, and more importantly, total sales might very well hide important signs for determining if a lack of performance of your firm is the result of actual decline in local economic activity or an indication your dealership has lost its competitive edge. To truly understand the financial characteristics of your firm, you must divide sales into segments and therefore understand what contribution each segment makes to your firm's financial performance. With this information, reviewed frequently, a dealership owner can quickly see if the local economy is sliding into decline: "Strong managers constantly study their business... in good times and bad to look for ways to improve productivity, sales, gross margin, reduce expenses and improve profitability."

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