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Archive for the 'News' Category

Prepping for Disaster: Is Florida Ground Zero?

BDA’s Operations and Management Consultant, John Capponi wrote an extremely well-received article that appeared in April’s issue of Restoration and Remediation. It asks the question whether Florida is the “Canary in the Coal Mine” in regards to the future of the restoration industry. We think this is a must read for anyone in the restoration business. Read the full article here: https://www.randrmagonline.com/articles/87886-prepping-for-disaster-is-florida-ground-zero

The Three Types of Motivation and Why They’re Important

There are few other jobs that are as motivation dependent as sales. This is because salespeople face so much resistance and rejection and must have or develop resiliency and a set of habits or processes that carry them through the tough times.

One of the key responsibilities of sales management is to keep salespeople motivated. Some of that is by the quality of the inter-personal relationships they develop; some based on the Sales Manager’s understanding of the rep’s personal goals; some of it is based on leadership fundamentals.

But here’s the thing. Salespeople are motivated three ways. And if you try to motivate them based on the wrong approach your efforts are worse than wasted, they may amplify the negative motivation!

Sales Motivation now breaks down in the following way:

Extrinsic motivation is somewhat “old school” at this point. People with extrinsic motivation are motivated by commissions, money, cars, trips to Hawaii, materialistic things. This type of motivation fits the stereotypical salesperson of yesterday and some business owners think this is a requirement in their salespeople but the facts are that only about 25% of salespeople today are extrinsically motivated.

Intrinsically motivated salespeople are motivated by satisfaction, love of what they do, mastery, being part of something bigger than themselves. 47% of salespeople are intrinsically motivated but there’s an even more important stat I’ll share at the end.

13% of salespeople are altruistic (being of service to others) while the other 15% are a combination of these three.

It is very important for Sales Managers to understand the difference between the types of motivation so that they can provide the proper type of external motivation.  And to complicate matters further altruistically motivated people should not really be in sales.  Their most effective role would be in customer service.

Now, ready for the most important stat? Elite salespeople – the top 7% – are the most extrinsically motivated group while the largest percentage of altruistic salespeople – a whopping 35% – can be found in the bottom 10%.

So, when it comes to hiring or motivating existing salespeople, understanding what motivates them is crucially important!

To find out how to discover how your salespeople are motivated give me a call at 847-386-6556 or tim@gobda.com and I’ll schedule a free, no obligation consultation.

Cash- Now You See it and Now You Don’t

Creating an Effective and Simple Purchasing Process

Cash management requires special attention by all your company staff, not just because cash is quite elusive, but also because a restoration company cannot operate without an adequate supply of cash on hand.

The use of an effective and simple purchase order system for cost control for purchasing materials and selecting subcontractors will help your company maintain healthy job profit margins and protect cash on hand.

These are some of the most common reasons why restorers do not use purchase orders:

  • Don’t want to take the time to get quotes or bids- just get the stuff done.
  • We get the bids from suppliers and subs, and that is enough.
  • Too much bother and paperwork.
  • Takes too long and prevents efficient operations.
  • Have worked for years on verbal agreements- no problems.
  • Employees will not buy in.

Purchase orders are considered the best accounting practice for managing the ordering of supplies, materials, and services. They allow you to specify, confirm, and track every detail of an order placed with a vendor or subcontractor. They are even more valuable since they enable restorers to never lose sight of committed costs from the beginning to the end of a job. An effective purchase order process provides such advantages as:

  • Guarding against overpaying or double-paying bills.
  • Ordering flexibility to avoid job delays.
  • Verifying delivery of materials and satisfactory completion of services.
  • Monitoring subcontractor payments and retainage.

Without an effective purchase order process in place to track job costs from start to finish, restorers run the risk of thinking a job is more profitable than it really is, overpaying suppliers, or simply running out of cash.

Use purchase orders to control costs in order to manage job profitability and cash flow, as well as to deliver the specifications outlined in the scope of work. Develop a Work Plan:

  • Identify Job Stages using the Xactimate® Estimate Categories.
  • Determine Job Stage resources- in-house labor or by subs.
  • Establish a Job Budget by Job Stage.
  • Create POs for each individual supplier, vendor, and subcontractor.
  • Monitor committed costs to actual costs- keep the job on budget.
  • Review all bills and credit card receipts for accuracy.
  • Confirm that all materials have been received and services completed.
  • Review the Job File to make sure that all bills have been accounted for.
  • Approve bill payments.
  • Pay bills within the approved payment dates.

A purchase order process allows you to keep track of all “committed” costs- essentially subcontractor payments and material purchases to effectively manage your jobs profitably and conserve cash. Give it a try and you will not regret that you did.

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth. Make it a prosperous month!  Stay tuned for next month’s article.

John Capponi, CR
Operations and Management Consultant
Business Development Associates, Inc.
john@gobda.com
Cell: 407-745-7698

Sales is for Almost No One

I am fond of saying that, “Sales isn’t for everyone. In fact, it’s almost for no one”.

Statistics and hard won experience tell us that about 75% of people who are in a sales job ought to be doing something else. Simply put they suck at the job of selling. It’s not their fault! They just don’t have the make-up to be salespeople.

These folks shouldn’t feel bad. It’s a very small segment of the overall population that has what it takes to be successful in sales.

I also like to say that many salespeople go from failure to failure their entire careers.

Why?

Because the nature of our labor laws prevents the poor performer’s last boss from telling the prospective next boss the truth about this salesperson.

Perhaps even more insidious is that many so-called sales organizations do not have a step-by-step process that they can articulate to new a sales hire as to how to be successful in sales at their company!

This is a sad state of affairs for everyone involved.

To learn more about hiring great salespeople and providing them with a process to be successful at your company give me a call at 847-386-6556 or tim@gobda.com and I’ll schedule a free, no obligation consultation.

How to Profitably Scale Your Business Using a Salary Cap

Integrating and Implementing a Salary Cap in Your Business

Sports fans understand the concept of a salary cap because most of the major professional sports leagues have some version of a salary cap. In business the term salary cap is used to define a determined payroll limit that restricts the amount of money to be spent on wages and salaries for a specific period of time. Some restoration business owners do not think about how their business could benefit from establishing a salary cap.

As a restoration business owner your single biggest expense is likely labor– the salary/wages that you pay to your employees (including yourself) and the money paid out to subcontractors or vendors for labor. If you want to impact your overall success and your profitability, then you need to start by looking at your labor productivity as the biggest component in your business.

In a growing business, labor costs can quickly balloon out of control. When small businesses are making the transition to medium-sized businesses it is possible to fall into a dangerous feedback loop of borrowing and spending. As you scale your business, your costs will grow, and it is tempting to see break-even (your previous measure of success) as sufficiently safe growth.

Greg Crabtree is the author of Simple Numbers, Straight Talk, Big Profits, and one of the great ideas in his book is the recommendation that every business should self-impose a salary cap just like the one that NFL teams deal with every year.

How to Calculate Your Salary Cap:

To keep the math easy we will use an example of a business that generates $1,000,000 in revenue. In this example the business owner has determined that they want a 10% pre-tax profit from the business after paying themselves a reasonable market wage.

The non-salary costs were calculated by adding up all the fixed costs like materials and subcontractors, and operating expenses like rent, utilities, insurance, communications, and advertising, etc.  This would also include the cost of goods (less labor and management labor) for $1,000,000 in revenue. In this example the non-salary costs are $400,000. As you can see, that means the salary cap is $500,000, which includes all labor costs.

A simple calculation can help you determine the total labor costs allowable with your current revenues.

Labor CAP Formula:

LC = (total revenue) – [(0.1 x total revenue)] – (non-labor costs)

($1,000,000) – [($100,000)] – ($400,000) = $500,000

Here is an example:

If the current payroll expense is more than $500,000 (and the other numbers are correct) then this business is not going to hit the profit target and the business is at risk. That gets us back to the labor productivity idea- the key is to generate $1M in revenue from that $500,000 of labor, and if you want to be more profitable than 10%, then you either need to cut your salary expenses without impacting your productivity (do more with less) or grow your revenue without increasing your salary (again do more with less…or technically the same in this case).

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth.

Make it a prosperous month!  Stay tuned for next month’s article.

Building Trust or Losing It?

The ultimate goal when building on-going sales relationships is to become a trusted advisor with the key word being trusted.

After all, people buy from people they know, like and trust, right?

So your actions have to be those that build trust rather than erode it, or even worse, create suspicion.

So, how to build trust? Do trustworthy things. Be honest. Serve the needs of your prospects and customers and when you can’t, step aside or better yet, recommend someone who can.

If someone has ever lost your trust reflect for a minute on what it might take for them to regain it. Or if that would even be possible.

Labor Productivity is the Key to Profitability

As a restoration company owner you must measure productivity to know if the money you spend on labor is paying off in terms of output (revenue). A labor productivity ratio is the simplest way to find out if you are getting the production you need. When you use this ratio on a regular basis you will be able to keep a sharp eye on your employees’ productivity.

Labor productivity is the number one key to profitability and is best measured by the Labor Efficiency Ratio (LER). This ratio indicates the productivity of all labor (production, sales, and management). You will need to measure each labor segment and monitor productivity per labor dollar and make adjustments as you see the LER decreasing. With the downward pressure from the insurance industry you can no longer wait for six months or longer to see if things improve. Adjustments must be made as quickly as possible when you begin to see a decline in your LER from previous periods.

The Direct Labor Efficiency Ratio (DLER) is calculated by dividing Gross Profit (minus direct labor, benefits, and employer burden) by the direct labor cost. For example, if your company had a Gross Profit of $4 million and a direct labor cost of $1 million you would have a DLER of $4. This means that for every $1 you pay your production employees the business receives a $4 return on that investment.

Here are some tactics to improve your Labor Efficiency Ratio:

  • implement an effective scheduling process
  • provide a quality back-office support Team
  • reward your productive employees for performance
  • recruit, hire, and on-board high-performance employees
  • implement and integrate lean processes
  • boost employee morale
  • set clear and attainable goals
  • reevaluate your staff on a regular basis
  • give praise and recognition.

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth.

Make it a prosperous month!  Stay tuned for next month’s article.

John Capponi, CR
Operations and Management Consultant
Business Development Associates, Inc.
john@gobda.com
Cell: 407-745-7698

Your Prospects Aren’t Looking for a New Best Friend!

When you are cold calling a new prospect by phone or in person, you are, by definition interrupting them. The question is, do you want to be a meaningful interruption that they ultimately welcome because you are bringing solutions to problems that they are grappling with or simply a waste of their time?

If you’d prefer the former, you need to understand the specific business pains they are likely to be having and know exactly how you and your company helps them address those pains.

Your scripting needs to be carefully written to quickly convey that you are a resource, not an oxygen thief!

How well do you understand your customers and does your script get you meetings or shown the door?

Want to learn more about how to create powerful sales strategies for your business? Give me a call at 847-386-6556 or tim@gobda.com and I’ll schedule a free, no obligation consultation.

Making the Right Decisions in Your Business – Know Your Numbers

Frustrated by the returns you are getting on the time and money you have invested in your business and feel like you cannot get control of the situation? If so, you are not alone. Restorers across the country are struggling to make ends meet, making less money, working more hours, and taking less time off. Many do not take a vacation or time off because they are scared to death their business will fall apart.

Many restoration companies have entered the “black hole” phase of business and do not know how to get beyond it to smoother sailing. In my three decades of working with restorers across the nation I have seen their businesses grow from $1 million to $5 million in revenue and pass through the black hole. To survive, the restorer must have adequate resources to take responsibility for the key functional areas. They are forced to add staff and infrastructure, and increase expenses before they can really afford to. The most challenging level of profitability is between $2-$3.5 million. Even if you try to add resources as late as possible and maybe even pay for only part-time help, at the end of the day you are going to drive profitability down and risk destroying your business.

Running a fast-growing restoration business is no guarantee that you will build wealth. You must make the right decisions to create the efficiency and profits you need to harvest the rewards of your hard work. This industry lives and dies on margins, with restorers on a never-ending quest to increase revenue and decrease costs.

According to Greg Crabtree, author of Simple Numbers, Straight Talk, Big Profits, the 4 Keys to unlock your business potential are:

  1. Get your owner compensation right.
  2. Know what your true profit is.
  3. Manage your labor productivity.
  4. Prioritize your cash flow.

In our upcoming blog articles you will learn the connections among profits, cash flow, and productivity of labor. If you are serious about making more profit in your business, stay tuned for the series on “Is Your Business Sucking the Life Out of You?”

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth.

Make it a prosperous month!  Stay tuned for next month’s article.

Are Processes Causing a Traffic Jam in Your Business?

Bottlenecks in Your Business Processes are Sucking Profit!

If a warning light flashed on your business dashboard at every point in your company where work flow tasks were slowed down, or waiting to be worked on, you might be surprised by the number of bottlenecks in your restoration business. From a failure to get accurate lead intake information; to a service break in customer support; to lack of the needed equipment, materials, and supplies on the jobsite; to failing to enter timely information, communication, and documentation in your restoration management software could have profit-killing bottlenecks lurking everywhere waiting to pop out and cause major chaos.

What is a Bottleneck?

A bottleneck in production and project management is one process in a chain of processes, such that its limited capacity reduces the capacity of the whole work flow. An example is the lack of materials on the job-site when workers arrive to start a job, which causes a halt in production, worker and customer frustration, and increased direct labor costs.

Bottlenecks are constraints that limit a system’s output; e.g. completed/collected jobs on time and on budget. They can be physical or non-physical. For example, a physical constraint could be the capacity of a piece of equipment, limited materials, or an unqualified worker. A non-physical constraint might include a company policy, negative attitudes of employees, or low work in process.

What is Your Throughput?

Bottlenecks in your business determine the speed at which you get things done- the throughput. These system-busters set the pace for the whole company and if not addressed they will completed jobs, cash flow, and profit. Ultimately, they can bring your business to its knees.

In my experience as a consultant, insufficient sales are often the major constraint on the throughput of many restoration and reconstruction businesses. No matter how efficient the operation, without a steady flow of sales into the pipeline, the output is always disappointing.

Key Insight:

The challenge is not just to remove a bottleneck in the step of a particular system or process, but to elevate the performance of any core business process that constrains the throughput of the entire company; e.g. your lead-generation or lead-follow-up system is not producing enough sales or a lagging production system causes longer lead-times and slower sales throughput.

Can People Be Bottlenecks?

We all know a bottleneck when we encounter it. Ask any employee and they will quickly point them out. Sometimes we even feel frustrated with a person we think is the bottleneck. However, look for problems within the system or process before you blame people. More often than not, the person will perform better once YOU improve the business system. If the person is still not a good fit for the job, make a change.

What’s Holding You Back?

Now, consider your business goals, and ask yourself, “What is holding us back from achieving some of these goals? What are the obstacles or bottlenecks in our business systems and processes? How can we increase sales throughput?”

A little attention to eliminating bottlenecks can pay big dividends. Open your lanes of traffic and watch sales and profit accelerate!

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth.

Make it a prosperous month!  Stay tuned for next month’s article.

John Capponi, CR

Operations and Management Consultant

Business Development Associates, Inc.

john@gobda.com

Cell: 407-745-7698



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