|
Mar 2013 - Vol 8, Issue 3
|
|
|
|
|
|
|
MANAGING RESULTS
|
Greetings,
This month's AV Matters is all about RESULTS and how to work towards the outcomes you want. Our first piece is an invitation for Rental-Stagers to participate in the 2013 Business Metric Survey. With the results you can compare your company to industry averages and receive a personalized report from yours truly.
My Best Practices column shares a story about how budgeting works in day-to-day business. Setting goals can make all the difference if you know one simple word.
Also in this issue of AV Matters is my monthly video installment - this time on Evaluating the ROI of Software. More results-focused advice to help you run your business.
In Closing Thoughts, I recall an important personal experience about managing metrics. I ask that readers share their stories as well.
***
Thank-you to everyone that has shared this newsletter and encouraged folks to subscribe! We have added a lot of new readers and even a few Facebook followers. I very much appreciate it!
Thanks for Reading,
|
|
|
|
|
| The 2013 BUSINESS METRIC SURVEY |
How to Improve Your Company Faster
Take advantage of free business analysis by participating in our survey
The Stimson Group is in the business of helping companies discover the next step. After many years of analyzing financial statements for the technology rental industry, we have learned four basic truths:
- Rental Production companies that compete on price don't have an accurate understanding of their direct costs (or those of their competitors).
- Managers that carefully track costs but aren't making the profit they expect, often misunderstand the relationships between metrics.
- Owners that do not set goals, monitor results, or adapt to changing times tend to under-utilize their assets, undervalue their services, and overvalue their companies.
- Most managers and owners need some help in understanding how business metrics relate to business practices.
The Rental and Staging Business Metric Survey provides invaluable financial analysis to owners and managers that want to reinforce good practices and address weak results. The companies that participate range from $1 million up to $50 million in revenue. Participation is free, the data is probably at your fingertips right now, and the benchmark report comes with a no cost, no obligation, one-hour phone or web conference consultation session. The Time is NOW
If you are a rental-based event or production company in the US or Canada, if you want to learn more about how your industry works, if you want to know how you can get better results, then you will want to read the full survey prospectus and instructions: The above link will take you to a sign-up sheet. You will then be linked to an overview of the survey with complete instructions for gathering your data. If you still have questions, then just email me. Deadline for Participation is March 29!
|
BEST PRACTICES SERIES
|
Managing Results vs. Reaching Goals
Budgets: Are you the fly or the windshield?
 One of my Facebook friends recently posted this graphic from the fan page for Dave Ramsey, a personal finance expert. It prompted me to share an anecdote about a client who once had an epiphany about budgets. For some time we had been focusing on business results with the goal of developing a budget for the next year. We went through the usual exercise of tracking metrics and noting trends. Several key expense categories were steadily moving down - a sign of renewed discipline in the organization. We used these trends to set reasonable expense goals for 2013 and forecast a net profit that met the owner's expectations.
We also identified which expenses were discretionary, such as supplies, payroll, bonuses, profit-sharing, capital purchases, and coffee. These items are All of this was discussed, evaluated, and agreed upon by management. However, I could tell that folks were not grasping how the budget was a tool. "The P&L just tells us the results. It doesn't change what we do!" was heard at the table. That's true I said, unless you compare the P&L to your budget.
Once we finished the budget and completed the first month of operation we found small errors in the original data. One manager had overlooked an ongoing expense obligation, another overlooked one person in his headcount, and an expected savings in insurance costs did not manifest in the final negotiation of benefits. Oh, and surprise - revenue was less than forecast. The net result was a reduction in the projected profit for the year. The results changed, but no one seemed prepared to do anything about it. This is when I turned to the owner and said, "After all you've accomplished, are you willing to sacrifice the profit you budgeted - already?"
"No."
After just a few minutes, the budget was adjusted and the profit was preserved: A planned new hire was eliminated to compensate for the under-count on existing personnel. The employer contribution to healthcare was reduced slightly after consideration was given to reducing profit-sharing or reducing health benefits. A planned purchase of new equipment was delayed by one quarter, which reduced financing and depreciation expenses. All were minor, proactive decisions that preserved overall goals. The company moved from being the victim of circumstances to being the manager of its own destiny. All of a sudden, the budget was everyone's new best friend. Bonuses and profit-sharing were untouched, which made the managers happy. And the sharing of healthcare expense was acceptable because it preserved the low deductible that employees valued. Profit became destiny instead of happenstance.
Without a budget, most companies would either suffer the results or make a knee-jerk reaction on cost reduction without considering the big picture. They might cut marketing or eliminate long overdue raises when better choices could have been identified. They might eliminate repainting the office because it seems frivolous (when it was really morale-boosting). Budgets also teach us to look at an entire year and not just one month. In a highly seasonal and reactive industry, it is critical that management sees the bigger picture!
Too many companies settle for the profit they make instead of working for the profit goal they have set. If 20% net profit is your goal, then write a budget that gets you there. Don't compromise until you have reviewed all your options. That is true budget discipline.
The team in my example continues to match results to budget every month and make changes in planning to preserve its goals. At some point they may even experience "excess profit" so we can see how bonuses and profit-sharing can benefit.
Budgets help us set and keep goals provided we judiciously exercise the "No" prerogative.
Food for thought. Thanks for listening...
|
VIDEO
|
Focus on the ROI of Infrastructure
Our theme in this issue of AV Matters is "Managing Results". Outcomes are the byproduct of planning, effort, and execution. Too often I see companies that under-utilize expensive tools like rental software, CRM, or ERP systems.
In this month's video, I encourage managers to "Do the Math" and calculate the value of an investment into better software systems. It might be worth forgoing the purchase of a new video camera if you can gain the efficiencies that proper infrastructure can yield.
 | | Evaluating the ROI of Software |
Each Best Practices video will be added to my YouTube page and as inspiration permits, you may see additional video blogs from time to time. I hope you find the content helpful. -Tom |
 Closing Thoughts | 
Here's a few scribbles from the margins:
I am looking for stories about lessons you have learned in business. Many of you have shared them with me over the years, but now I want to do something with them. Here's one of mine:
Early in my management career I struggled with logistics and scheduling at a growing, young company. Alford Media had quickly become the data monitor gurus in Dallas. Even our competitors sent customers to us. In the early 1990's data meant REALLY HEAVY 35" Mitsubishi monitors that took two strong people to lift. It also required someone with enough smarts to interface computers to the display - something we take for granted now. And every time the client fiddled with their computer, the interface needed to be reset. So, every data display rental was an obligation to go back out to the job site once or even twice a day. It was a lot of manpower for just a monitor rental. We made a lot of money off the monitors, but the number of people we needed on the warehouse/delivery team was getting out of control.
So one day I calculated how many man-hours a week was spent supporting these rental transactions vs the hours spent working on "shows". Then I looked at the revenue. Small rentals including data monitors represented about 5-6% of revenue and dang near 50% of the operations crew's time. I showed this to my boss and we raised delivery and setup prices - a lot. In fact we went from being competitive on price to the most expensive company in town. Customers would call us, we'd explain what we do and why it was so expensive, they would call every other supplier in town and eventually come back to us because we knew what we were talking about. Profit per transaction increased dramatically. As monitor rentals declined, I was eventually able to reduce the number of my operations crew in spite of the fact that the company was growing 50% per year. We simply focused on the more efficient revenue of doing shows. Needless to say, costs went down as a percentage of revenue...by raising prices and turning down business.
Timing is everything. By the end of the next year, new technology all but eliminated the data monitor rental business. In the meantime at least we enjoyed focusing on higher profits instead of dwindling revenue.
Please send me your real life business lessons. I would love to share them here.
See you next month, Tom |
|
About Thomas R. Stimson, MBA, CTS
Tom Stimson has thrived for thirty years in the Audiovisual and Live Events industries. His career has touched AV Rental, Integration, Staffing, and Management. As a Consultant, Tom today helps companies define their goals and then design a plan that will take them there. For more information visit the website.
|
|
|
|
|
