Subscribe to our newsletters & stay updated
Let’s say I gave you $100,000 to grow your business. You go to dinner to celebrate your great windfall; the next morning, you’re at your desk, admiring the check (yes, it’s not coming by wire transfer or PayPal). Here’s my question: Would you know what to do with it — first, second and third — for the greatest impact?
It sounds like a lot of money, especially if you’re the typical contracting company at $2 million a year or less — sometimes way less. However, it’s also an amount that can disappear remarkably quickly unless you have a plan and use the money to execute that plan.
Also, I know that some problems aren’t money problems. I’ve had some clients who, when I began working with them, were already deep in debt because they needed money and resorted to maxing out their credit cards and extending their suppliers' offers to finance equipment and materials. The problem is, they would only have fallen deeper down the hole if they had gotten a check for $100,000.
They lacked Planning Power, which means a plan on which projects to work on. It should be the right project, at the right time, in the right way. They didn’t possess systems such as Operating Power (today, it’s my Signature Operating Manuals System program), so they threw people at the problem, hoping they’d magically make everything work right.
I understand this. After all, I had done the same thing at my family-owned plumbing, heating, cooling and electrical business. Hey, we were lucky. We had some money, so I used it. The problem is, I used it all wrong. I threw money at problems, hoping to make them go away — not only did it not work, but sometimes it actually made things worse.
An example of this is all the years we ran without operating manuals. It led staff to ask the same questions over and over again. We had no organizational chart, so no one knew who was handling what. Either multiple people did the same thing or no one did it; both were bad.
I had no structured pay for how the technicians could make more money. They would end up at my door at 5 p.m., asking for a raise and knowing they would typically get it because we had so much work; we needed them to stay.
Think about how easy it is to load up your credit card. It feels like free money until the statement shows up at the end of the month and you have to pay the bill. Do you even remember what you bought? In general, unless you have a plan for using money, it’s easy to fritter it away with zero impact on growth. That’s spending money.
A better idea is to formulate a plan for investing your money in a way that will generate a return on that investment. Simply spending money with no plan behind it makes no such promise.
The plan I’m referring to is based on a written goal for your business — usually a revenue goal — broken down into a series of subgoals that will get you where you want to go. It’s got clear objective benchmarks, such as: How many trucks do you need to get to that goal? How much money does each truck need to generate? (Hint: at least $250,000.) Should you acquire some of your competitors? If yes, and I hope you said yes, which ones? And, finally, when will all this be done?
Why is this important? Let’s say you’re in New York and want to drive to Los Angeles. Unless you’ve done the trip 1,000 times, can you get there without a map or GPS? Maybe. You could decide to drive west, but chances are it’ll take forever. By the time you get to your destination, the opportunity you were after will probably have expired.
Your goal is the destination, and the plan lays out the milestones you need to hit to ensure you will get from NY to LA as quickly and efficiently as possible. Milestones require KPIs (known performance indicators) or what some call metrics. And the key is the right KPIs for your money makers — the people who turn the wrenches or screwdrivers.
The rewards go to the service techs, the system advisors and installers. Then, the service managers, install managers and your top managers win by having their KPIs move the needle the way you want.
What’s common to the clients I worked with who were in debt when I showed up? Their staffing ratio of outside staff to inside staff was way out of whack. This meant there were too few outside staff to the number of inside people. With the systems and Staffing Power, we changed this for the better — much better. And the good news is money flowed in versus out.
A budget allows you to see what the inflows vs. outflows are and make a course correction in real time. This is your financial GPS. Goal-setting and benchmarks in writing (and known to those who need to know it) would ensure that $100,000 works as hard as possible to solve your biggest problem, or challenge and create opportunities to grow and be profitable.
Even if you don’t have an extra $100,000 to invest right now, I suggest you take some time to find out what those projects are. Because whether it’s $100,000 or $1 million, I guarantee it will go fast with no impact if you don’t know exactly where to aim it.
© 2023 All Rights Reserved