Who's Really Running Your Dealership?

June 27, 2003

As I work with dealers around the country, I find many dealers really are not running their companies. They're actually doing work they allocated to other employees. Falling prey to this problem is costing them thousands of dollars and eventually may seriously hamper the profitability of their companies.

As I work with dealers around the country, I find many dealers really are not running their companies. They're actually doing work they allocated to other employees. Falling prey to this problem is costing them thousands of dollars and eventually may seriously hamper the profitability of their companies.

In his book The E-myth, Michael Gerber describes a problem that happens to many small business owners: they often do not actually run their companies. You know what it's like--you have problems to look after that take you away from the really important things you should be doing.

For example, let's say your company pays you $50,000 in salary per year plus benefits and a company car. This means that you actually cost the company approximately $75,000 per year or approximately $38 per hour. So, when you spend an hour going to the bank, you spend at least $38 to do that. If you spend two hours per day doing non-productive tasks, that costs your company almost $20,000. What's worse, those unproductive tasks take you away from top level income-producing tasks that may cost your company $200,000 or more.

The fact is that if you want to earn $100,000 per year, you should never be doing work that you wouldn't pay a person $100,000 per year to perform.

Easy to say, but tough to implement. When I call my clients who own water equipment dealerships, they often answer from their cell phones and say things such as, "I'm just here digging a trench for an installation today," "I'm on my way out to fix a leak that my installation guys messed up yesterday," or "I'm just mailing out my rental statements today." While all these jobs have to be done, should they really be done by the highest paid member of the team? Not only does this cost the company a lot, but it means that for that period of time, your company had no leader.

Through seminars, I teach that the most profitable things you can do for your company are recruiting, training and managing great salespeople. That salesperson you  never had time to train should be contributing about $10,000 per month in profit to your bottom line. That's about $120,000 per year. Many dealers don't have time to recruit, train or supervise their team because they are out fixing a leak. I realize that leaks have to be fixed, but there is no fixed leak that will add $120,000 in profit to your bottom line.

That's not the worst thing about failing to actually manage your company. Many dealers in our industry do not have budgets, books, a monthly review or accountability meetings with key employees. When I ask why, they tell me they don't have time. Why not? Because instead of running their company, they are working for it--often at the most menial jobs. If the owner abdicates his responsibility to make policy and enforce it, who fills this vacuum? The employee you actually are paying to carry out orders and not to make policy decisions.Here's what you can do to improve the situation.

*                     See yourself as the top dog. Some owners see themselves as the servant of the employees. If there is no one to set up a show, they will do it for their sales staff. If the installers make a mess, they will go out and clean it up. The first step in effective management is to see yourself as the owner and top dog--someone who has earned the right to prioritize and expect good performance from the staff in exchange for wages.

*                     Prioritize jobs and select the ones you should be doing. Make a list of all the jobs at your company that should be done. Start with important ones such as planning, budgeting, marketing and reviewing financial performance. Then list duties such as cleaning the company truck, mailing statements and fixing leaks. Put someone's name next to each job and make sure your name is beside only the ones you would expect an owner to perform. Maybe you don't have enough employees to do all the work. Maybe if you were selling or managing instead of licking envelopes, you could afford to have those employees.

*                     Look for time wasters. For seven days, make a list of everything you do at your office--each task and how much time you spend on it. A great way to do this is to carry a small pocket tape recorder and make a recording of each thing you do. At the end of the week, analyze your time looking for time wasters and jobs you did that are not suitable for the owner to do. You may be amazed at how much time you spend on things that will never add one cent to your company. If you find such things, take steps to eliminate them.

*                     Outsource if possible. Many owners of small businesses do not consider outsourcing. This is an inexpensive way to get what you need at a reasonable price. It simply is hiring someone not as an employee but just to do a specific task for a specific fee. "Bob" always is scratching out his advertisement copy 10 minutes after it is due at the paper. He sometimes even fails to advertise because he misses the deadline. He certainly couldn't afford an ad agency or consultant to help him. However, Bob contacted a local college and hired a graphic arts student who wanted the experience and created the ads for a very reasonable price. Bob also has advertised in a senior newspaper for retired advertising writers and has hired a highly skilled retired ad-person for a reasonable price. Bob pays only when the job is done. It's planned in advance and Bob has great copy that is delivered on time. Outsourcing to businesses and "irregulars" can save you a fortune, meet deadlines and free you up to actually run your company. Consider outsourcing installations, accounting, auditing, collections, recruiting, mailing and many other functions.

*                     Get rid of`incompetent or untrustworthy staff. Some owners are surrounded by people who cannot get the job done. If you are, you will never be able to do the things that really matter to your company, because you will be spending your time fixing things your staff should have done. If you have a lot of incompetent staff, it could mean you are paying too little to get quality people, you are not training and managing properly or maybe you want to feel indispensable and you make sure no one can do their job without micro-management by you. Whatever the cause, this condition is costing you far more than the cost and effort to fix it.

You may feel you just don't have enough time to get to the important things. Remember that we all have the exact same amount of time--24 hours each day. If you constantly are late, putting out fires and doing jobs that will never make you rich, it isn't that you don't have time. Successful dealers have the same amount of time as unsuccessful dealers. The difference is all in how they spend it. Remember that if you are not making a conscious effort to spend your time wisely, the possibility of it happening through chance alone is slim.

If you found a company on the stock market that had no system to check the books, no people planning for the future, no one auditing the results, budgeting and making plans for the future and a president who went out to dig holes and fix leaks instead of running the company, would you invest in it? If your company is run that way, you have invested your future and life savings in just such a company.

About The Author: Carl Davidson is president of Sales & Management Solutions Inc. a company that specializes in training, recruiting and consulting for the water equipment industry. For more than 20 years, 4,000 companies in seven countries have used his services to incre

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