tips for quality service___________
Investment Versus Return
by Carl Tompkins
|“Trying to be too much to too many in too large of an area is a common mistake in business.”|
The principle of considering investment versus return may sound quite simple and straightforward, but most businesses fail to follow this basic idea when the going gets tough. The most common practice is to downsize in order to eliminate expense and show a profit under conditions of reduced revenue.
World-renowned consultant Peter Drucker told a large audience of chief executive officers, “Saving one's self into prosperity is not a business strategy.” Once subtraction and division overtake the mathematical business practices of addition and multiplication, it becomes nearly impossible to reverse the course of the free-falling elevator that must always be going up to sustain success.
I refer to this as business cancer, because it starts at the surface and continues to erode the body of a business to the point where the very heart and backbone fails to function and the business dies. Under this scenario, the only hope is the miracle of a booming economy in which anyone and everyone is making money.
Glass shop owner Mike Fox of Windshield Pros told me that while much of his competition directs all its attention to internal issues of downsizing and fails to keep its attention on customers, he invests heavily toward outside customer service and finds no better time to earn higher market share. I don't know about you, but this sure sounds like a “strong company taking long strides in bad times” to me.
The theme that Mike himself follows is key and requires him to assess where his shop's investments of time, money and assets are being deployed and assuring that those investments are earning the required return.
An example of this took place a few years ago in Houston, where a company was mandated to eliminate four people and trucks at its distributorship location in order to have expenses match the same ratio-to-sales percentage that existed when business was good. A 90-day stay of execution was granted by corporate office since a consultant was brought in to analyze how the facility’s services could be amended to regain business using alternate avenues of service.
The outcome was fantastic—at the end of the test period, the business grew beyond the original satisfactory volume and was providing a higher return on assets. Everyone was able to keep his job and all because an investment was made that earned the required return the allotted time.
In order to be good at following this principle, you must first know your market. This means knowing whom the players are, what they are buying, from whom and why. While the competition is reducing services through downsizing, accentuate new and better services that customers require more than ever. One might ask, “How do you extend more service when you are already providing all that money, people and time can allow?” The answer, just as it occurred in Houston, is to either provide better service to a smaller area or to fewer customers.
Too Little Time
A common mistake in business is trying to be too much to too many in too large of an area.
Re-align and deploy your asset base on tighter targets. In other words, quit making bad investments with your time, money, people and other assets that don’t earn acceptable returns. Look at the miles that are covered. Typically, companies don't receive any compensation for covering large expanses of territory. More customers can be served if shorter distances are traveled. Focus on regions with higher earning potential.
Who fits the best profile of a target customer? Focus on customers who pay their bills, value service and are willing to pay for such. These customers are much more loyal.
While these tips focus on the aspect of marketing, continue to assess how work is completed. Any investments that increase productivity are good if the buy-back timeframe is reasonable.
Many companies are scrambling for survival and all at the customer’s expense. Make sure to take advantage during such great times of opportunity. Just make sure that you invest only in those things that can account for the proper return.
Carl Tompkins is Western states area manager for the Sika Corp. of Madison Heights, Mich. He is based in Spokane, Wash.
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