After 30+ years in the industry, I totally admit that I am the most blatant thief there is. Charles Caleb Colton was the first one to write, “Imitation is the sincerest form of flattery.” I believe that is true because I steal the very best ideas and examples that can be found and share them over and over again. Read the following two stories and you, too, may be imitating and flattering the two real companies below. 

Four Months into the Year – Is the Business Plan Still Alive?

Profit First: Taming Your Money-Gobbling Monster

Are you familiar with Profit First? It’s something I explored in my previous article, but even if you didn’t read it, you may have heard of this revolutionary approach to cash flow. Based on the best-selling book by Mike Michalowicz, Profit First presents a simple way to rethink your business accounting. While the conventional cash flow formula is revenues minus expenses equals profit, Profit First offers a subtle tweak: Revenues minus profits equals expenses.

In other words, it’s an accounting paradigm in which you set aside profits from each bank deposit you make, and only then do you pay the bills. It forces entrepreneurs to proactively set aside real cash earnings, and it can transform any business from a money-gobbling monster into a profit-generating machine.

In short, it’s all about taming the beast that is your business—but where to start, exactly?

Understanding the Problem

It’s probably fair to say that most business owners review their income statements infrequently. Chances are, you simply don’t have the time to review your important financial documents every single day, and that’s okay! But you probably do check your bank account daily—if only to make sure you’ve still got enough in the reserves to cover the day’s operational expenses.

This is human nature: We want to know what’s happening now, at this very moment, and to make our decisions based on that snapshot of information. There’s actually a psychological term for this tendency; it’s called the Recency Effect. This is the human inclination to overemphasize the right now. This practice of making financial decisions based solely on the current account statements is also called Bank Balance Accounting.

Bank Balance Accounting is common, but also problematic. It’s all but impossible to make real long-term plans or to prepare our companies for growth when all we’re looking at is today’s balance. Business owners who rely on Bank Balance Accounting tend to fall into the Survival Trap—not necessarily working toward a vision or a long-term goal, but simply doing whatever’s required to keep their business afloat in the here-and-now.

The other piece of the puzzle is GAAP, or Generally Accepted Accounting Practices. It is the paradigm that most small businesses use, and the one that often goes hand-in-hand with Bank Balance Accounting. GAAP simply refers to that conventional formula discussed earlier—Sales minus expenses equals profits.

GAAP makes logical sense. What it suggests is that we should sell as much as possible, spend as little as possible, then pocket the difference. The math checks out! The problem here is human nature. We’re not logical creatures and GAAP may make numerical sense, but it hardly makes “human sense.” All too often, GAAP manifests as an obsessive desire to sell more and more, to make your company bigger and bigger, improving top-line revenues and hoping that translates into a big increase in profit. Again, it’s not really a visionary approach. It’s all about doing something now to keep the company afloat. But the real problem is that, as we grow our businesses and making them bigger and better, it causes operational expenses to balloon. The more we make, the more we spend. Essentially, there’s nothing left to claim as profit.

A New Way to Consider Your Business’s Financial Health 

In short, what business owners need is a way to monitor the financial health of their business while also working toward real, long-term growth solutions. Profit First provides exactly that, and it does so in a way that uses our natural human behaviors advantageously. In fact, Profit First actually encourages business owners to continue with their Bank Balance Accounting habits!

Maybe you’re ready to get started with Profit First and learn how you can actually be smart about generating business profits. I can recommend a few action steps: Draw a line in the sand today and commit to taming your money-gobbling monster. No more paycheck-to-paycheck living. No more survival mode. Make real growth your goal!

A Certified Profit First Professional that is knowledgeable about home services businesses can coach you on the best approach—how to tame your beast and turn into a cash generator. Ask your Profit First Professional about taking an Instant Assessment, which can provide you with some specific numbers and calculations as you rethink your business accounting practices.

Your company may seem untamable, but Profit First can work for any business—assuming you pursue it with the right coaching. Take a minute to seek a Certified Profit First Professional today!

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These group of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area!

Too Busy to Worry about Your Attitude?

“We” is stronger than “me”.

I was a scout leader for years. At one of the first meetings where the boys were introduced to the wonders of camping, one of the scouts carefully made his way to my side of the room. He signaled for me to bend down so he could ask me a question. I reached eye level and heard him carefully and deliberately ask in his scratchy, little voice, “Hey Mister, when do we get the weapons?” I learned then and there that we were in for a long summer. However, it got me thinking as a business man. It’s easy to teach young boys who are already filled with wonder and ambition how to use tools to benefit them out in the wilderness. How can you bring that kind of enthusiasm and excitement to an older, struggling, and frustrated service contractor? Maybe that scout is right. Maybe we need to, “Bring out the weapons.”

I remember the first time I saw the Honeywell Prestige Thermostat. I was at a trade show a few years ago and remember noticing it from a distance. Prestige was bright, clear, and quite an attractive piece of equipment. As I was admiring it, I didn’t consider how important this new product would eventually be to my company.

How exactly could a small piece of equipment become a “weapon” in my arsenal? Shortly after the tradeshow, I met an outside territory salesman from Ferguson Supply Co. located about 50 miles from my shop. I had ordered a gas powered, 16-horsepower industrial vacuum cleaner with 100′ of 6-inch vacuum hose. That will pull the nylons out of your dryer vent! But, my service company intended to use it to suck out old insulation from attics to seal the plumbing and electrical penetrations, cracks, and crevices to increase the IAQ in the home. That process stopped the infiltration of dust-ridden, dirty, hot, humid air into the home. It was a big market for us at the time.

The Ferguson dealer decided to introduce the idea of the Honey Prestige Thermostat. The representative arrived right on time and we helped unload the heavy vacuum off the back of his truck. He then gave the standard pitch, “If you need anything, I’m a phone call away.” Two weeks went by and the Ferguson representative called to find out how our new vacuum was working. He then asked, “Rodney, have you seen the new Honeywell Prestige Thermostat?” I shared my trip with him that involved the recent tradeshow. He insisted in presenting me with a few thermostats. Again, he arrived on time as promised with the entire new Honeywell Prestige line up in tow including, the outdoor sensors and remotes. He also brought pre-wired transformers and powered them while he explained the features.

It’s great technology but let’s face it, contractors have had more thermostats move off van shelves due to damage than to add-on sales. We have attempted the, “Programmable saves 10% on your bill” approach with mostly disappointing results. There was still an add-on market but, I’ve found what sells thermostats the fastest is what sells everything: a pretty face. Except, I’m not talking about the pretty face featured in commercials, I’m talking about the pretty face of the thermostat. It gives the “Wow, the Honeywell Prestige is beautiful!” It also helped that the thermostat had just enough bells and whistles to be useful without being complicated. And, at the time, it was the easiest high-end thermostat to program and use.

Keep in mind, we had a very good relationship with our local distributors, who visited and delivered products to the company weekly. They could probably match prices, but the Ferguson representative was adamant about being our Honeywell supplier. He had certainly earned our business simply because he opened our eyes to a product that we had failed to utilize. Our local based reps had mentioned the product but, didn’t think to demonstrate it. I understand that distributors and their salesmen can’t carry every product around but, presentation without demonstration is just conversation. If something is merely mentioned, it can be easily forgotten. The representative from Ferguson gave a demonstration that compelled us spend money. 

However, it was a concern that our new potential supplier would not be present with the 100-mile round trip that he would have to make. Would we still get the same attention as our previous distributors? The Ferguson representative eased my worry quickly by emailing us the order form, allowing us to do online transactions and covering the shipping costs for us. The process was so incredibly easy that it allowed us to give him the business he had earned. I immediately bought a thermostat for my office, one for my house and one for my son’s house, who is also our lead technician. I knew if we all fell in love with the product, it would fly off our service trucks and into our customer’s homes. We stocked our trucks and printed a book with five thermostats, including pictures. We have to show that pretty face! Anytime a customer suggested that their thermostat might be an issue, the book was ready in hand, resulting in a sale almost every day. Most of them being the most expensive, the Prestige.  

Thermostat sales became the new add-on and once again, we obtained ownership of the most valuable piece of advertising real-estate: Our name branded in their home. I say, “Hats off!” to one excellent territory rep, who used his weapons of presentation and demonstration to earn our business. For us, the Honeywell Prestige and the book we developed to clinch the sale with the homeowner is a weapon that we will always value. And, it’s one we’ll fire off any chance we get.

Service Roundtable is dedicated to growing your bottom line and helping your business maximize its full potential. These group of contractors work together to assist you with marketing, sales, business, and so much more. Twice a month, seminars around the United States and Canada are held to network and further assist your business. Visit Service Roundtable.com to see if there are Success Days in your area and do not forget to register for International Roundtable in New Orleans on April 4 - 6!