What Did You Learn Last Year?

Take stock of successes and failures to prep for 2019

Most of us have heard the saying, “Do you have 30 years’ experience, or one year of experience repeated 30 times?” The other one we have all heard is the definition of insanity: “Doing the same thing over and over again while expecting different results.” The point is the same in either case. Are we learning and changing?

As the year draws to a close, it’s important to reflect on our victories as well as our failures. What did the company do well over the past year, and where were we weak? Have a company meeting to discuss these, and set goals for the coming 12 months. Below are a few topics you might want to discuss.

How many employees (techs or staff) left the company over the past year? If the number is high: Why? Look at your hiring practices. How do you interview; do you utilize DiSC testing? (DiSC is a personality test that measures dominance, influence, steadiness and conscientiousness.) Are there core issues with how you treat employees? Look at your employee orientation program and training process. I heard a great quote a while back, “Seldom is the problem in front of you the real issue. There is usually a foundational problem behind the issue.” Having an honest discussion with employees on this topic can be very telling. If you are an owner or manager, critical or defensive comments will silence the room. Swallow your pride to accomplish the objective of improvement.

Gain/Loss of Maintenance Agreement Customers
Maintenance agreements are the foundation stone for profitable growth. The final selling price for most trades companies is usually heavily dependent on the company’s active maintenance agreements. Keep accurate records of maintenance-agreement customers gained and lost during the past year. Compare total active maintenance agreement customers at the end of the year with each previous year. Is the number growing? If not, why not?

Did the Company Make a Net Profit in All Departments?
This can be an elusive number for a couple reasons. The first is cash flow verses accounting. As most are now aware, it’s not unusual to see an accounting P/L statement that says you made a profit — which you will have to pay taxes on — while noting there is far less money in the company checkbook. Look at net profit from both perspectives.

The other issue is departmentalization. Few companies departmentalize all the way through sales, overhead, labor and materials, only looking at the company’s overall net profit. The potential problem: One department can easily be being subsidizing another, and no one knows until it’s too late. Review your real net profit by department, and compare with past years. Are profits increasing or decreasing, and why?

Debt Status
List all outstanding debt including balances owed on loans, unpaid credit card balances, overdue money owed suppliers, personal loans to the company, balances on your lines of credit and overdue taxes. Totaling those dollars can be a wakeup call. The objective is to have the total owed figure substantially decreasing each year. Hint: Build debt repayment into your overhead cost when setting proper hourly rates. If you don’t, debt repayment can quickly swallow net profit.

Closing Rate on Sales Presentations
An acceptable closing rate for sales presentations is 50 percent or more. What is your rate per individual? Is it going up or down year to year? If the closing percentage is not increasing, why? Do some, or all, salespeople and/or selling technicians need additional formal training? Reviewing these percentages annually — or, even better, monthly or quarterly — can keep the sales team on track.

Total Dollars Tied Up in Inventory
How many dollars does the company have tied up in inventory? If the dollar figure is going up, it might be because the company is growing — therefore additional inventory is needed. It also might be caused by a sloppy purchasing policy. Look at those numbers and ask the question.

How Often Did You Meet with Your CPA?
It’s hard to manage the company without taking a close look at the bottom line. Did the company make a profit this past month? It does little good to find out you had a rotten year three months after the close of the year. Company owners need to know how they did, financially, within 10 days of closing out each month. Make it a habit to sit down with your CPA by the 10th of each month to review your numbers. If he or she is not providing practical advice on how to improve your bottom-line profit, find a new CPA.

Select a date for your annual company meeting to discuss at least some of the above items. Make it fun. Choose a really nice restaurant so you can not only review progress but also thank those who helped the company prosper. Everyone wants and needs to be appreciated.

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