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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.
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 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.

Cell: 407-745-7698

Fighting About Deductibles or Simply Collecting Them?

Many restorers have a challenge collecting deductibles (especially if they wait until the job is complete when their customers go from being grateful to greedy!) I recently read a post by Restoration Rebel Jason Monday that I thought was brilliant and wanted to share:

“I have found that offering in-house financing in these situations is very effective. You explain (to your customer) that you will offer to bill them monthly for up to 36 months with 0% interest and secure the deductible amount due with a lien. This allows you to come across as very compassionate and non-threatening. I have very rarely had a homeowner actually take me up on this offer. More often than not, they just pay by credit card or check in order to avoid a lien on their property. (Instead of threatening, it appears to them that you’re going out of your way to help.)”

The “Fu” in Jason is strong!

Lack of Formal Processes Could be Costing You Thousands

Inefficient Processes Are to Blame for Wasted Work Hours

Wasted time by managers and workers costs many restoration companies as much as 20 to 30 percent of their revenue each year. WOW, that could be $200-300K per million dollars in sales. Talking about unnecessary money down the drain.

The most common cause of wasted time during the workday is inefficient processes and duplicated efforts, a new study shows. A research study conducted by The Powering Productivity firm that surveyed business leaders across the US, UK, Netherlands, and Germany suggests that workplace inefficiency is a core management issue. This study indicated that the primary cause of wasted time during the workday is inefficient processes (44 per cent), followed by an overload of paperwork (43 percent) and meetings

(41 percent). This wasted time can severely affect customer satisfaction and employee retention.

Business inefficiencies are more than a minor distraction for restorers and their managers. Research reveals that employees (57 percent) and customers (48 percent) are the most likely to suffer because of wasted time. This problem creates a burden on your employees and customers and can lead to retention problems in the long term.

As you review your restoration business, your processes may not be perfect; however, you have them even if they are random and have been developed by employees who are no longer with your company.

In order to operate with maximum efficiency your processes must have a common language and work in alignment with each other. That common language is your business operating system (BOS).

Just like a computer that slows down or does not operate correctly, you might be experiencing a faulty operating system. How do you know? There are several symptoms:

  1. Business feels chaotic and out of control.
  2. Increased sales are not resulting in increased profit- only more chaos.
  3. There is a high rate of employee churn causing employee retention and hiring issues.
  4. Poor accountability. Employees are not 100% clear on their key responsibilities. This results in dropped balls, frustrated customers and stressed out employees.
  5. Meetings feel like a waste of time and ineffective or seen as complaint sessions where nothing ever really gets accomplished or solved.
  6. The business is in constant firefighting mode, moving from one fire to the next.
  7. There is no budget which is used to plan spending. You do not have the information to make decisions. Cash flow is a problem.

Do any of these symptoms sound familiar? If so, in order to deal with all these issues, you need the right business operating system in place. The right business operating system contains a group of processes that go from the 50,000 ft. level of the business to the “boots on the ground” activities of each employee. The right business operating system drives clarity and results.

To solve the seven problems mentioned above, you need a business operating system with processes for:

  • Clarifying and communicating your Company’s vision.
    • Clarify and communicate your vision (core values, core purpose), so everyone knows where the business is headed long-term, why it’s going there, and how your team will behave along the way.
    • Studies have shown that only about 14% of all employees understand their company’s strategy.

  • Determining the right goals for your business.
    • Goals are what drive your business closer to its long-term vision.
    • Each goal should have an owner and a way to determine if it has been reached (a KPI or key performance indicator).
    • Keep your team aligned and on track to achieve the vision and goals with a proper meeting rhythm with specific agendas and meeting dates.
  • Linking the company goals to the day-to-day activities of each employee.
    • Each employee must understand the specific role they play in achieving the goals and vision. This process drives accountability by clarifying each team member’s key responsibilities and how their success is measured (KPIs).
  • Solving problems (fires).
    • Since every business encounters problems, each business needs a process for keeping the business out of firefighting mode by identifying and solving business “fires” in a systematic way. Without this process, a business can quickly become overwhelmed with all the problems and not make progress on its goals.
  • A process for your processes.
    • Your business needs a way to define each of the core processes which deliver value to the customers so they can be executed over and over again flawlessly.

  • Developing a budget and generating solid financials on a monthly basis.
    • So many businesses truly “fly blind” either by (1) not having a budget or (2) not updating that budget on a monthly basis with actuals so they can make adjustments.
  • Software for easily updating and tracking the right key performance indicators (KPIs).
    • Every business needs a process and software for easily tracking the key performance indicators of the business which define the success of the business.

As you can see, these processes are all interrelated and necessary for success. If your goals are clearly defined, but each member of your team does not have clear roles and responsibilities, the team will end up wasting time working on things that do not get you any closer to achieving your Company goals.

What to Do Now:

If you are ready to streamline your restoration business by implementing high-impact business processes, consider BDA as a resource to help you with this initiative. We have more than 3 decades of industry experience and have helped many of our clients build high-performing companies.

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.

Cell: 407-745-7698

One of Many Truths About Salespeople I Have Learned Along the Way

I have personally hired scores of salespeople and here is one absolute truth that I have discovered in the process. When you hire them you believe that they “can do it” but you never know if they “will do it” until they actually attempt to do the job in the real world.

Now, this doesn’t mean that you just hire anyone, throw them in the deep end of the pool and see if they sink or swim. In fact, it means the opposite of that.

It means that you use the most rigorous hiring process that has proven to be effective. You cast a wide net, screen hard and whittle down the candidates ruthlessly.

You put in the time and effort to understand that salespeople aren’t like anyone else that is hired for your company and why HR sucks at it. You learn what strengths and weaknesses and other characteristics are required for salespeople to be successful and you don’t allow people that don’t have the right combination to join your company.

And when you’ve hired who you think the very best person is you on-board them with diligence and attention. You give them the tools and scripts and processes and hold them accountable. You make sure that they use the CRM properly so they can be organized and efficient.

You manage them with care, building rapport and coaching them to achieve their personal goals with the knowledge that if they achieve their personal goals you will achieve yours.

You back them up by delivering on your product and service promises and refuse to allow sniping from the production and admin teams and vice-versa.

And even after all of that, while you believe that they can do it when you hire them, you never know if they actually will.

Business, like life, is an ever unfolding process. You never stop working at it until it’s over. If you’re hiring salespeople that fail, learn what you need to know to stop doing that. Your business depends on it.

Closing the Deal or Opening the Relationship?

Sometimes sales “experts” talk about closing skills as “going for the kill” or “not taking no for an answer” or they have 87 different closing techniques like the “Puppy Dog” (let them take it home and they’ll fall in love with it) the “Ben Franklin” (show the advantages against other options on a sheet of paper) and on and on.

Here’s the problem. If you are in a business that relies on repeat business and on-going relationships, your prospects see through these closing techniques instantly and their resistance to doing business with you goes up, not down.

There are some exceptions; time share sales come to mind, but for most of us, we need a legitimate and credible way to not just close a sale but also open a relationship.

The way forward starts with marketing. Do you understand the “pains” that your prospect verticals have? How does your company solve those pains? How different is your approach to those solutions from your competition? What programs have you developed to specifically focus on prospect pains?

If you start with finding pain, ask the right questions to uncover your prospect’s compelling reason(s) to buy and follow a consultative sales process there is no need for hard closing or fancy techniques. The sale should close itself.

This is not to say that there aren’t details to work out and obstacles to sometimes overcome. The point is that if the prospect sees their pain clearly and sees your solution as way that makes sense to address that pain, then you are at the point that you want to be, which is that you have determined that there is a mutually beneficial reason to do business.

All that’s left is to work out the details and open the relationship!

Tim Miller

Creating Long-Term Success in Your Business While Creating Employee Satisfaction

Building a performance culture system in your business will help you develop the right habits to grow your business to new levels of success. This may mean changing the habits that were initially required by you to make your company successful in your initial owner-reliant model, and it may mean some hard choices; however, the reward is worth the effort.

Developing a performance culture that produces long-term benefit takes discipline and commitment- the essential components required to create good habits. Before you start to implement a high-performance culture in your company, it is important to recognize the bad habits your company may have as well as understand how you can develop good habits.

Here are some examples of bad habits:

  • Micro-management/lack of delegation- business owner and key managers that are overly involved in too many aspects of the business because they are worried about failure.
  • Constant fire drills- company leaders are too focused on solving immediate challenges versus strategic planning and continuous process improvement.
  • Immediate gratification- business owner and employees are focused on immediate personal benefit versus mid-term to long-term strategic results, i.e., “employees- what is in it for me today” or business owners who spend all the profits versus investing in future growth.
  • Directing versus motivating- leading by force versus developing employees to be their best.
  • Silo mentality/mavericks- focusing on individual effort versus the team’s over-all performance; lack of trust inside the company, office politics, etc.
  • Lack of accountability- allowing employees to get away with bad performance.
  • Hiring too quickly and firing too slowly- putting off hiring until it is absolutely needed and ending up with a subpar employee or not firing soon enough and being stuck with an undesirable employee or behavior.
  • Lack of communication- business owner and/or company managers who view meetings as a waste of time and fail to communicate strategic initiatives to the employees.
  • Opportunism- chasing the newest “shiny object or strategy of the month” versus focusing on what company does best.

If you can recognize one or more of these negative behaviors or have noticed unhealthy habits inside your company, you are not alone. Developing a high-performing culture will help you change these behaviors and develop positive habits that will increase profit margin and lead to long-term sustainability and employee engagement and satisfaction.

In the book, “The Power of Habit: Why We Do What We Do in Life and Business,” author Charles Duhigg explains how business leaders achieve success by focusing on the patterns that shape every aspect of their lives.  He explains that “a habit is an activity that a person deliberately decides to perform once and continues doing without focus, often frequently.”  This is a great read, as well as a good resource to help you implement a high-performance culture in your business.

There are four elements of a high-performance culture to position your company for success:

  1. Effective leadership- the cornerstone for transforming your company culture into a performance culture.
  2. Niche strategy- the foundation for building or increasing your competitive edge and includes your Unique Value Proposition (UVP)- your way of standing out from the competition.
  3. People management- simplifies the complexity of managing a growing business and helps you develop a performance culture.
  4. Process excellence- creates a system and scorecard that enables your company to grow profitably.

Implementing these four elements is a process itself and requires discipline and commitment from you and your key managers. After implementing this process, you will see significant positive change within your company.

How to develop a high-performance culture in your business:

  • Personal vision- define your personal vision and tie it to the company vison.
  • Leadership assessment- evaluate your leadership style and create an action plan to leverage your strengths.
  • Niche strategy- evaluate your unique value proposition and improve your competitive edge.
  • People management- determine the key positions in your company, select the right employees to fill these positions, establish focus, prioritize action plans, and create accountability.
  • Process excellence- define your value chain, achieve process excellence, and measure Key Performance Indicators (KPIs).

A written plan with weekly updates will encourage good habits to flourish. Research has shown that people do better when they write down their plan and document the activities in a journal. The same is true when developing a high-performance company culture. Writing down your plans creates clarity and forces you to think through action.

Having a focus on performance will help you as the business owner to develop strong leaders, high-performing employees, and a great company culture. It will create habits that drive profitability and increase your company value.

What to Do Now:

If you are ready to streamline your restoration business by implementing a high-performing organizational structure, consider Business Development Associates as a resource to help you with this process. We have more than 3 decades of industry experience and have helped many of our clients build high-performing companies.

At Business Development Associates, 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.

Cell: 407-745-7698

The Will to Win: A Closer Look

The legendary basketball coach Phil Jackson said that he didn’t really understand the will to win until he saw Michael Jordan win the “flu-game” on the way to the Bull’s fifth NBA championship in 1997.

I have also seen the will to win play out with the salespeople that I have trained over the years. When we hire salespeople, we use a highly predictive assessment to help us understand if they have the right combination of strengths, weaknesses and other characteristics to make it within our industry and selling system.

As you might imagine, there is a range of acceptable assessment scores and deciding on hiring the right salesperson depends on a certain intuition on the part of the recruiter who is evaluating the three interviews we conduct, looking carefully at the resume, appraising the reference checks and so on. There’s a certain art as well as a science to this!

Now, even after all that careful vetting the one factor that trumps everything is the will to win. This is usually demonstrated by new sales reps that fully buy-in to their training. They don’t waste a second questioning the methodology, wondering if this will work, if the trainer knows what they are talking about and so on. They trust the process and therefore free up all of their attention and energy focusing on learning what they need to learn. They are usually champing at the bit to get out into the field to start using what they have learned.

I recently started training two salespeople for a new client. One had great assessment scores, the other more average. One tore through his training with total commitment and focus and the other struggled. One set four At the Desk Meetings in his first week of prospecting and one quit before the training was completed.

Which one is taking off like an F-16? The one with the average assessment scores but an amazing will to win. In fact, he showed me something more important than the will to win which is best exemplified by a quote by the famous college football coach “Bear” Bryant who said, “It’s not the will to win that matters—everyone has that. It’s the will to prepare to win that matters.”

This rep, who is off to an amazing start, has the will to win and perhaps more importantly, the will to prepare to win!

©Copyright 2011 Business Development Associates, Inc.