Take The Mystery Out Of Managing A Successful Business

If you don’t think managing a successful business is a mystery, then you are kidding yourself.  There are so many elements that go into good management that you must be aware of and practice at all times.  I want to talk about just one that, in my opinion, makes the difference between success and failure.  Find out what it is.

I am sure you get numerous industry related newsletters each week.  If you are like me, some you keep and actually read and some you click on unsubscribe.  There is one email newsletter I receive 3 times a week that I read religiously.  The program is called “Never Cold Call” and is authored by Frank Rumbauskas.  I like Frank’s writing because he provides some good ideas and most important, he is not afraid to call a spade a spade.  What intrigues me is he bucks conventional thinking by teaching that cold calling is a waste of time. 

One of his recent articles was called “My best Sales Secret: Don’t be a Dumbass”.  Now if I were to call my readers a Dumbass I am quite certain I would receive a flood of unsubscribe emails.  However, I do applaud the risk he takes and his moxie, because he wants to grab your attention so he can drive home his point.  It is his way of giving his readers a wakeup call!

I don’t think for a minute that any of our industry owners and entrepreneurs are  Dumbass’, but if you are still “managing by the seat of your pants” then you should know that you are flirting with failure.  How do I define managing by the seat of your pants?  It is a combination of a number of things that starts with having no written goals and no financial business plan. 

Having managed the finance end for a major manufacturer in this industry for 30 years, I can tell you that there are still far too many dealers who manage by the seat of their pants and it affects everyone.  I cringe when an owner tells me that it all boils down to the number of units they sell.  To prove my point, take the following test and if you can’t answer any one of these questions, then I submit you have a problem.

  1. Do you know what your salaries are as a percentage of gross sales?  If you are running at 11% or 12% I guarantee you are losing money.
  2. Do you know what your advertising is as a percentage of gross sales?  If you are 1.5% of sales or more your advertising is ineffective and costing you profit.
  3. Do you know what your gross margins are on new and used units by month?  Just because you sold more units than last year doesn’t mean you are more profitable.  In fact the opposite can be true.
  4. Are you hitting industry standards for volume and gross margin in parts and accessories?  This is your cash cow, but if you are realizing less than a 34% gross margin, you are giving money away.
  5. Do you know the efficiency ratio and gross margin of your Service Department?  If you are obtaining less than 9% of gross sales and under 65% gross margin you are losing profit.
  6. Do you know how much operating line of credit you are going to need during periods of slow sales.  Any less than enough spells real danger.

You should be able to answer all of these questions and many more on a month to month basis.  If you can’t, then you are “managing by the seat of your pants”.  Don’t be offended, because there has never been anyone willing to tell you different.  What you have been taught is that the more units you book and take the more valuable you are.  The Manufacturer, your Bank and Finance company are all making money but are you?

You can solve the mystery of successfully managing your business by loading your data bank with as much financial information as possible.  The only way you can maximize your profit is by setting goals, making a plan and then adjusting to it throughout your fiscal year.  Anything less is putting your success in the hands of chance.  Remember, success is not measured by the number of units you sell, but by the equity you build in your company through the profit you earn.  This is my goal for all Motorsport and Marine dealers!

If you are not comfortable with financial management or unsure how to start, contact me for a free consultation and I will walk you through the steps.  As Rob Parker of Parker Marine Group said in his testimonial, “it may be the most important call you make this year”.

Comments (6)

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Great article. We've invested heavily in the past year on improving our financial systems (and our financial intelligence) and it offers a great clarity with definite bottom-line results.

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