An article written by our mentor Trevor Payne.
At first sight Doug is very similar to many small business people; a tradesman who was very good at his job so he started his own business. Because he was good at his trade, business grew, word-of-mouth referrals led to more business, leading to more referrals. After a year or so of these referrals Doug had to start employing people, one at first, and then putting an apprentice on. The rest of the story is pretty familiar…
Planning and objectives – He’s not quite sure really? How about ‘three times as big as he is now’, whatever that might mean? It’s pretty hard to pin Doug down any more than that, or what the implications might be in terms of working capital, vehicles, tools & equipment, or number of employees. Maybe he will cross these bridges when he gets to them. (Fingers crossed). (Did he have any idea at all? Did he have any plan? Just where is he going?)
Marketing – non-existent. No advertising, there is a small Yellow Pages, no company stickers, no give-aways or brochures. Maybe a few old business cards he had made on the cheap in the glove box. In fact Dougie hardly gave away his telephone number or e-mail address. You had to become a customer to get that!
Pricing strategy – now how much does the competition charge? Doug doesn’t want to be out of line with what his competition charges. But because he is a good hard worker and organiser, he could really differentiate himself by charging more. In other words, no real strategy. (But why charge what the others are charging, some are going broke?)
Financial statements – basic. Set up by the accountant for accounting purposes, not management purposes. He couldn’t tell you his cost of sales or gross profit with any degree of certainty. And as for gross profit on any type of job, no way. This worried him a bit, but too busy to worry about paperwork as it just got in the way of him doing ‘real’work.
Measurement, collection of data and analysis – one thing for sure, you can’t analyse what you haven’t got. Sure there were timesheets, employees wanted to be paid, but no job cards for Doug to measure what happened on a job, or whether he made a profit. Neither did he collect any information on where customers have come from or where new business opportunities might be.
Systems and procedures – not a written system or procedure in the place. He was too busy working in the business and not on the business to have these things.
In fact there was only one real point of difference in Doug’s story. He was sort of profitable, But why, or how? Now that’s the question. If he knew that he could do much better.
And although the answer to that question may not be clear there may be a key. Many small business people like Doug go from being employed to start their own business. Doug had a brief detour along the way. He was Manager of a larger business for a while, responsible for a larger workforce.
Maybe, just maybe, he bought with him some ideas about good systems and procedures that underpin his business from his previous job.
And if we can get him to document these systems and procedures and to develop his data, information and knowledge to go with them, Doug will be surprised at how much better he can do.
And Doug’s business will be something much, much more because he spent many years building his skill as a tradesman, and he was very good at that side of things.
But right now, although he is a very good tradesman with a good team available – inadequate planning and objectives, no marketing, poor pricing policy, no understanding or interest in financials, no measure of any results – yet he still has a good chance to build his business, but he needs all these other things to do that.……..he also needs someone to help him learn how to run a successful and profitable business.