Small and Medium businesses are truly the lifeblood of the U.S. economy. SMBs produced 46 percent of the private nonfarm GDP in 2008 – See more at: http://www.sbecouncil.org/about-us/facts-and-data/#sthash.xjZNIMOE.dpuf. The definition of a SMB is less than 1,000 employees.
When you think about this, it is astounding information. Most of the people I know work for major corporations, including myself. We are given tools, training and develop expertise in how to make our shareholders wealthy. Most, probably all, small businesses do not have access to these types of resources. This reality has inspired me to write about what I have learned and how I can help owners of SMBs re-shape the way they think about the world and how it works.
For starters, if you are an owner of a auto repair shop, auto dealership, beauty salon, do you intimately understand your most impactful revenue stream? When I mean impactful, I don’t mean the top line number. I am talking about the margin generated. Have you performed trend analysis, have you segmented your business revenue, do you deeply understand your cost drivers, are you taking advantage of your supply base, do you submit RFQs to select the best supplier, have you thought about expansion? Answers to these key questions will open up your world to limitless possibilities. Most of these questions are answered through data driven research.
For example, I drive passed Northside Lexus (http://www.northsidelexus.com/) on a daily business, and each time I drive past this dealership, these key questions keep crossing my mind. I try to think about how I can help this dealership increase it’s gross margin, optimize its sales channels, market better offers to its customers. I can take a hunch on what the answers are, but I need to peal into the data in order for me to understand it.
If you want to create a massive impact in your business, you need to begin thinking about many things.
1.) DATA, DATA, DATA!!!!
I honestly cannot stress how important number 1 is in your quest to improve your business. Data tells you everything, it tells you stories, it makes you think of different angles, it develops you a beautiful picture and vision that you need in order to pivot your operations to cater to your profit centers, and drive away from your cost centers. Going back to the auto-shop, I know nothing about this industry by the way, but I can start assuming what works and what doesn’t. One of the biggest problems with data, is that many of your systems are operating on an antiquated DOS bullshit program, which is over 50 yrs old. Well, the first thing you should do is call the jack-ass who installed this on your system and tell him to get the data out for you ASAP, and pay money for this! This is an investment! This will help you build your story!
Assume that you fix 50 cars per day, different auto-makers, different types of owners, different problems, but are they so different?
Think about it, have you ever cataloged the make, model, year of any of your customers? Do you even know what percentage of your client base is Honda Civic, 2011 DX, vs Toyota Corolla LE, 2011?
You might be asking, why is this important, this guy is an idiot? Think about it, and this is an extreme example, if 98% of the cars that come through your shop is a 2011, Honda Civic DX, you just have found a unique opportunity to consolidate your supply base. How many vendors do you have that deliver you spare parts? Is it 4, 5, 10? How many of them are experts in the 2011, Honda Civic DX? If only one of them is, why do you buy from the other two? Why don’t you negotiate a better rate with your #1 supplier for Honda Civic, DX parts? Why don’t you trend the different problems that you see with this specific car, and develop a purchasing strategy based on these trends? Just imagine, if the Civic DX has a faulty wheel bearing, and you know that it’s a common problem with these cars, if you negotiate a better cost with your #1 supplier, you may be able to improve your gross margin by 20%!! That’s a hell of a lot better than expanding your shop so you can cater to 75 cars vs 50, right?
I know I know, you’re probably too busy dealing with payroll problems, tax bullshit, family issues, health problems etc etc. If this is the case, open yourself up to hiring an intelligent, driven and qualified millennial consultant that can help you figure this crap out…
2.) Now that I have the data, now what?
Now it’s time for you to understand the data. What drives your business, what are your best areas for optimizing your gross margin? Do you know who your #1 supplier is? How much business do you do with them? What do you buy from them? Are they your #1 customer? Are they an expert in something that your other suppliers are not? Finding out this information is incredibly important and only you have the answer to these questions..
As another example, suppose you have been monitoring your labor hours and the types of car repairs your guys are working on, and getting this information is not going to be easy, and you begin to learn that your best area for margin growth is general maintenance, i.e., oil changes, A/C maintenance, 30,000 mile major service for the lovely Honda Civic DX, suppose you earn a 45% gross margin on the 30,000 mile maintenance, and you found this out by doing your research, tallying up the labor hours, tallying up the invoices and classifying each auto-repair, what do you do next?
You MARKET THE SHIT OUT OF IT! Make a freakin’ coupon program!!! Advertise on the internet! Make a Facebook page! Drive customers to your shop and say, “I GIVE THE BEST FREAKING 30,000 MILE MAINTENANCE IN ALL OF HOUSTON, TX!” Say it LOUD, say it PROUD, DRIVE traffic!!!
Data is POWERFUL. It will give you new meaning to life, and a sense of excitement that you’ve only been able to imagine at this point.
3.) OK Harsh, I have cataloged my data, I fully understand my business, I know what drives the most margin, I’ve optimized my supply base, now what? Expansion.
Remember back to the first day that you opened up your shop, and the first dollar that entered your register, imagine how gratifying that feeling was, and now that you’ve done it for 30+ yrs, that feeling is gone. If you want your vigor back, take an ambitious leap. You might be thinking, I’m too old, I don’t have energy to do this anymore. Remember this, Colonel Freaking Sanders was 62 years old when he started the KFC franchise. You’re never too old, you’ve just lost a little bit of vigor that will come right back like a giant wave, waking you up, if you took a huge leap like that. Now think for a moment, you’ve steadily been adding $50,000 a month to your Owner’s Equity because of stout margin optimization, $600K for the year, I can guarantee that you can put down $300K, borrow the rest and invest into a new facility, with new equipment, NEW COMPUTER SYSTEM, not that bullshit DOS crap you’ve been running, and start a new shop. Build on that equity, expand again. Before you know it, you will have 3 facilities that are killing it for you, adding more money to the bottom line, enough to build your nest egg, take a vacation and sell that shit to someone else.
Think for a moment, of all the crap you’ve had to deal with in your life, from the IRS, to a bad year, money problems, family problems, health problems. All of which has consumed you to a point of defeat. It’s time for you to stand up and say, F this, I am tired of this crap, I want something more out of my life…Take that leap, understand your worth and build your life to be better than it ever has been…..
If you are serious about pursuing financial success and freedom, you can email me at firstname.lastname@example.org, and I will help you out for free…Just as much as you’re tired of it, I am too….