I know that I’ve said more than once that companies in the same channel are typically more similar than different. Sports select for specific attributes in athletes, which is why you don’t see 145lb NFL linemen or 280lb gymnasts. By that same token, the demands of a given channel lead to business (the ones that make it, anyway) sharing attributes.
In talking with dealer clients about their challenges, the same topics come up frequently. The good thing about this is solutions that help one dealer usually help others who’re facing the same things. The solution may need to be tailored to some degree, but what works, works.
I’ve had many different discussions that have so much in common that sometimes I feel like, “I’m reading from a pre-prepared script; I’ve talked about this so much.” But if someone hasn’t heard it before and the topic is new to them, they’re gaining something from learning it.
In no particular order (although they segue together, in fact), here are some key takeaways that I don’t take for granted and that everyone already knows.
Regardless of the channel that you service, all of your job processes should be standardized. That’s true whether you are an installing dealer for consumer or ProAV or a multi-store retail chain. When I compare peer businesses whose revenue and profitability are vastly different, inevitably the one that isn’t struggling has mandated greater standardization into everything their teams do.
Looking to the installation channels (since that’s what most of us are familiar with), the fact is the only thing “custom” about “custom installation” is minor details between projects.
Following standardized processes means greater efficiency, fewer errors, more clear communication and better management oversight (not to mention increased revenue and profitability). While we’re standardizing our processes, there’s one you thing you want to get a jump on: Be ruthless with your inventory management.
I’m just going to say it; inventory is the devil. But it is a necessary evil. The worst thing you can do is fall in love with your inventory. Why? Because it will never love you back. Keep it around too long and it will only break your heart.
Inventory has one purpose in this world: to be sold. Ideally, you want to sell it as quickly as possible. The process is simple in theory: Spend money on inventory, turn it back into money by selling it to someone else and repeat the process.
That’s the catch; selling it. If you don’t do that, you’re stuck with it. You don’t want that. I have funny stories for days about deadstock, but they’re only funny in retrospect. At the time, they were nightmares.
There’s no one-size-fits-all solution to inventory management, but in broad strokes, only order what you’ve projected that you need short term. Installers and B2B teams have it easier than retailers; they’re only writing purchase orders to their vendors once they have purchase orders or contracts from their clients. Retailers, on the other hand, have to forecast (a fancy word for guess) what their stores are going to need.
Following that, you need to not only know what you own, but how long you’ve owned it. Review your aging inventory reports and make decisions about them. Ideally — there’s that word again — you can take action and sell it before it becomes unsellable. If you can’t, the final destination is listening to your accountant and taking write-downs and write-offs. No one wants to do that, but it is necessary as a last resort.
When it comes to the list of things you need to rigorously manage, you need to keep your mind not only on your inventory but also on your money. This may shock some of you, but not everyone is great at managing their receivables. It’s true!
You can only worry about being profitable if you have revenue. Your clients’ contractual obligations and payment terms have to be crystal clear, and your finance people need to be diligent in making sure that you’re getting paid in a timely manner. Doing a lot of free work upfront and then getting stiffed is a bad business model. Yet, someone somewhere wants to try it.
There’s more, of course. There always is. But tending to any of these and nailing them down is a good way to avoid becoming a case study or a cautionary tale.