Is it possible despite your success and profit, you are making one of the six common mistakes that rob family businesses of precious cash? Read on to find out!
Mistake #1) Assuming you’re adequately executing the fundamentals. Maybe you’ve been at this game for years, your business is big and very profitable, so you figure there’s not much you can learn unless it’s a new technology. Likely wrong. Time and time again I see companies that think because they are great, and growing, lose track of fundamentals. If you think about pro football teams, 90% of practice is done on basic fundamentals. You should be doing the same with your team. Each year I host an educational event where without fail a company CEO finally attends that knew about our events for years but thought he didn’t need any education. I love watching the change in demeanor as he soaks up idea after idea, sometimes translating to seven-figure bottom-line improvements all with much of that from fundamentals. And often the big guys are getting stunning ideas from small volume marketers. Go figure!
Mistake #2) No system for annually upgrading your customer base. If you are not deliberately culling out your worst customers (this goes for retail and wholesale) and adding to your “best of the best customers” in a systematic way, you are throwing away cash. Lots of owners skip culling, and even the ones that do think it’s a one-time event. If you make customer differentiation, or ABC analysis as I call it, an annual discipline, I promise you will capture even greater profits and cash. And be sure to involve your staff in the analysis. An owner that recently did this said his General Manager got a real eye-opener about what he thought was his “best” customer. With real numbers in hand, they were actually just barely breaking even on this huge account and now have an action plan plus a clear picture of true best customers. This is rocketing up profits in his lube division.
Mistake #3) Missing systems so customers use you for their bank. I’m amazed at the credit practices considered “normal” at some companies. When a CEO or CFO hears from a peer how they are getting their money, and it’s much faster than anything they do, they sit up and take notice. When it comes to collecting money, we often hear “but I can’t do that with MY customers.” Then, you talk to some guy that has the exact same types of customers you do, with the exact same competition problems, yet they have something that works better than you do. It’s pretty humbling but also pretty profitable!
Mistake #4) Mishandling debt and bankers. Many owners we’ve worked with grew up in the sales or trucking part of their business without classes in finance much less going to MBA school. When they deal with their bankers, they feel that they are at a slight disadvantage, and rightly so. As a former banker, one of my personal joys is empowering owners with all the “inside info” on how bankers look at their companies and, more importantly, sharing step by step methods to make any company more “bankable” which translates to absolute lowest interest expense. Of course, you may think you are already getting the absolute best rate you can. There’s another place where honest talk among non-competing peers can be a huge blessing.
Mistake #5) No system to evaluate all hard assets for bottom-line contribution. Whether this shows up as excessive repairs and maintenance costs, or non-producing assets that just sit without use, most owners get complacent. Excellent asset management requires application of systems discipline that is lacking in most operations today. And, you need this discipline to go beyond your fleet, to all hard assets owned. A good system not only can and will produce cash, it can also lower insurance premiums.
Mistake #6) No system for sustainable high performance employee development. The cash you get and keep is highly dependent on your people – their ideas and creativity, their adherence to existing good systems, their commitment to learning and continuous improvement. Employee development is often non-existent, left to chance, or selectively applied. This year more than any other, employee issues are coming to forefront of owners’ top challenges. Turnover is costly, mistakes are costly, poor customer service is costly, and long-term employees resistant to change are costly. That’s why our events often include how to create a high functioning work environment. It’s about bringing your rest up to the level of your best.
In today’s tough marketplace, you need every advantage you can get. Cash is critical to success. Check out whether our next Family Business Intensive might be a key to more cash for you at www.AskMeridian.com or call us at 817-594-0546.
Meridian Associates has been partnering with family-owned businesses for over 30 years to remove barriers, accelerate business growth, build their legacy, and reduce stress levels. With three, high-impact business events each year, The CEO Exchange, Women in Family Business, and The Family Business Intensive, we continually provide best practices & proven strategies that keep multigenerational businesses thriving. Discover how Meridian can help your business thrive through our combination of high impact business coaching, advisory, M&A, and precision company valuations by visiting www.askmeridian.com or calling us at 817-594-0546.
