6 Steps to Making Better Big Decisions as a Business OwnerAug 19, 2021
In the course of operating your business, different problems and opportunities present themselves and you have to evaluate a big business decision. Could be making a major hire. A simple change in production headcount. A piece of equipment. A consultant. A large advertising campaign. What does your inventory need to be? Cutting loose or taking on a big customer.
Take a moment to consider, when operating your retail sales, construction, manufacturing, or job shop different problems and opportunities arise where you must make big decisions that affect your company in a major way.
- Making a major hire?
- Change in production headcount?
- Purchasing a piece of equipment?
- Investing in hiring a consultant?
- Investing in a large advertising campaign?
- Inventory adjustments?
- Cutting loose or taking on a big customer?
If you’re more of a risk-taker, (like me, ) you might be inclined to do some quick chicken scratch calculations and go for it. Maybe your gut tells you it’s a good thing. Or maybe you have an extremely compelling sales conversation with some marketing consultants. So you go for it. Maybe it works out, maybe it doesn’t. I’ve certainly made decisions myself where I moved too fast and paid some pretty major “tuition.”
Or maybe you’re more conservative. Your initial reaction is, “no fricking way.” You begrudgingly listen to a presentation from a sales rep or consultant that doesn’t know your numbers and you can’t justify such a huge expense. You can’t see the return or it’s just too risky. You’ve gotten where you are and are comfortable. And that’s OK. It’s your business.
How did you arrive at that decision is the question. Is it based upon being open, and facts, and numbers ALONG with your gut?
Hopefully, your response is to be curious - something like this: “I’m not quite sure but I’m curious and would like to know more.” Here’s another question. If a scenario like the one I’m about to tell you about, who would you talk to about it? Do you have someone that knows you and your business including your numbers you can talk through these things with?
Literally right in the middle of writing this piece I received this email from my client Travis I was about to tell you about.
“Just some progress to note: Even with the decreased ad spend we did 60 quote requests this week. That’s still far too many so we are once again decreasing spend. Before the new website we were getting 20-30 conversions per week and we had that many from organic traffic alone this week.”
RIGHT NOW as I’m writing this we’re posting the ad for the new sales rep while also looking for more production workers. Here are some more specifics taken just now from their weekly metrics report.
- The average weekly sales the last five weeks have been $103,966 vs $91,189 the previous 5 weeks. (13.2% Increase.)
- AVERAGE # of leads is 45 with a high of 72. (from 20)
- Now reducing ad spend because there are too many leads.
But we never would have gotten to that point if we did not first make such a HUGE investment. We didn’t actually KNOW right at the beginning. There was some investigation work to do involving numbers and insights. We strongly suspected what we were thinking was possible initially, but we did NOT just go with our gut on such a massive investment.
Just How Did We Make the $50,000+ Investment Decision to End Up With This Whole New Problem of Needing a New Sales Rep?
Discovery and information gathering are key. Stop and think. The biggest mistake too many business owners make in general is they’re working on WAY too many things at once trying to generate cash or solve problems and they just never seem to catch up. They rarely slow down and take the time to stop and actually think through what would make the biggest difference right now. And honestly, I remember there were times earlier in my business when it actually felt plain WRONG to slow down.
Does It Ever Feel Just Plain Wrong/Bad to You to Slow Down From Fixing Problems, Pushing Work Out, Collecting Or Making Sales?
Applying my 30+ years of experience of analyzing and optimizing 100’s of businesses and running my own for 10 years, Travis and I were able arrive at a solid decision within 30 days based upon factual tested information.
“If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and five minutes thinking about solutions.” - Albert Einstein
How Travis Got to the Decision
Travis has been running his grandfather’s shed business for coming up on two years now. Last Spring, his 72 year old sales rep at one of their two sales lots was having health issues. And it wasn’t the first time there had been conversations about possibly shutting down the location at some point. December 2019 Travis and I created a brand new online sales channel. Where no online sales existed previously, they were doing as much online as either of the 2 sales lots for a much lower cost.
I had shared with Travis that I had been working with a firm called KristiJane (www.kristijane.com) that was relatively costly for a small business (<$10million/<50 employees.) Their current rates START at $5,000/month and that does not include Google Ad management or spending, or social media. We had talked previously about how those numbers worked for our business American Landscape Structures. Our conversion rate from visitors to quote requests tripled allowing us to generate the leads we needed while reducing our advertising expense. We’re getting a 5x return on investment and have not yet launched the new website which will generate even MORE traffic and leads.www.AmericanLandscapeStructures.com.
It didn’t seem right at the time how that would work for them. For one thing they were having a tough time already at that time with sales outpacing production. They wouldn’t need more leads until they worked out their staffing problem. This I refer to as “Knowing Your Current Focal Point.,” At the point of this initial conversation, Travis needed to be focusing on increasing production. Putting his FOCUS on sales would just generate more backlog - and no more profit because could only get paid on what they could actually complete.
So here’s the thing. Travis and I knew the numbers. I had a bit of catching up to do with the re-engagement but was familiar with his operation. We had set up two years ago a WEEKLY tracking system which I had been monitoring.
- We knew his weekly production and what he was doing to improve.
- Cash was not a constraint so they could handle the growth without causing problems there.
- Travis knew how much profit they made average on each shed.
- We knew his sales backlog trend (which was dropping.)
- We knew how many site visitors were converting into leads.
- We knew how many online leads they were getting each week and the conversion rate to sales on those leads.
- We could figure out how many sales we would need to shut down the location.
- We worked up the savings of shutting down the physical location (which would continue on and on, not just one time.)
- Therefore we knew how many new leads we would need to justify shutting down the physical location. (60/week from 20.)
Six Steps That Will Help You As a Business Owner
Make Better Big Decisions and Take Massive Action
- Knowing YOUR Numbers! (Check your gut.)
- Finding a way to make some space in your schedule to THINK and work ON your business.
- Having thinking partners that know YOU and your business from multiple perspectives - Sales, Operations, Finance, Human Resources, Organization.
- Knowing your Current Focal Point (CFP). (See offer on main page.)
- Knowing what TYPE business owner you are - a Gunslinger (like me) a Mechanic, or a Goalie. (Next chapter.)
- Knowing what STAGE business you’re in. (Coming soon.)
Over the next 60 days we followed the process and achieved the milestone as shown in Travis email early in the chapter. There are enough leads to hire another rep. Once the rep is up and running, we have the option of closing down the physical location.
If you care to learn more nitty gritty, feel free to read on, but you’ll need to apply the 6 Steps using your own people and information.
After the preliminary conversation, the first thing we did was a 30 day discovery, information gathering process. Kind of boring stuff about someone else’s business honestly, but it can be super exciting to see for your own business.
- Dropped their 12 month profit and loss statement into a spreadsheet analysis tool pulling out one-time and non-operational costs.
- Created a pro-forma - forward looking profit and loss statement including a break-even and “what-if” scenario function.
- This tool allowed us to easily and simply anticipate and calculate the anticipated effects of the decision.
- Analyzed the Google Ads and metrics (especially the visitor to lead conversion rate) to come up with the # of new leads they would need.
- Collect cost info from KristiJane so we could decide if that switch was worth making. (You have to be pretty doggone good to justify $3K/month for digital marketing consulting.)
- Connected Travis with my Google Ads ninjas about overhauling his account.
- Did some role play with Troy the new sales rep and worked through his tonality and language patterns - especially his opening.
- There was little doubt we would improve the site conversion rate due to my experience. (It has now happened.)
- For sure with the new sales rep we would be able to shut down the physical location.
- We would have a new problem as we would need more production staff to build 3-4 new sheds per week. (They’re very difficult to find, but we’re getting better at it.)
During this time Travis had already been in touch with Kristi Jane and after the 30 day report and action plan we developed, he decided to go ahead and not only hire them for the monthly service but also to build out a brand new website - another major expense - but easily justified because we had the numbers.
Travis and I also did a contract for us to work together for me to:
- oversee the process,
- be his thinking partner,
- work on the format and copy for the Google Ads landing page,
- Train Troy his sales rep as well as the new sales rep.
- Create the posting and develop the interview process so we end up with a super-star sales rep.
- Monitor progress toward closing down the physical location.
- Conduct ¼’ly financial reviews.
We’ll be publishing the job posting next week.
There’s an average of not quite $30,000/week in shed sales to replace to shut down the physical location. One thing we already know though is that we ALREADY have the lead engine in place to create those sales. We just need the sales person to follow up on them.
Snips, future blog posts etc.
That will be a chapter in itself. Back when I was a 100% travel management consultant working 100’s of miles from home, making a recommendation without first doing the research and confirming the details with the business owner was the fastest path to bad airport food. In other words, our working agreement allowed the client to fire us any day. I learned from that experience and with my own business how important it is to get into the numbers/facts.
You can always bring your gut into the equation, but without running the numbers, what if instead- it’s your emotions telling you a bad decision feels good?
Again - that’s a whole other chapter.