Ron, All I Need Is More Money!
I get so many calls from folks who insist that their only problem is that they need more money. Read my lips: “If your only problem is that you need more money, then you don’t have any problems.” This is true in almost all cases I have seen. Trust me; there is PLENTY of money out there. The banks NEED to loan it. Investors are sitting on the sidelines. (However, that could change in coming months.)
I do believe that you think you need more money. It’s a battle, day after day: trying to buy enough cars, pay bills, etc. Getting more money without solving the fundamental, underlying problems is “Ron’s watermelon story”.
A farmer is bringing in watermelons from Mexico where he gets a great deal at 80 cents each. He sells them for 78 cents but, mysteriously, is always broke. When asked about it, he snaps, “need more volume.”
I have seen it over and over. A recycler gets a new loan, or a line of credit, and then runs it up to limit. Sales spike temporarily and then level back off at previous levels. But now, there is new debt!
The main reason you think the whole problem is money? It’s because your profits and cash flows have deteriorated. They have been declining for years, but it’s subtle, and we can’t or don’t want to recognize it.
Other underlying reasons (in some semblance of order) are these:
- Too many employees – It’s the number one poison. If you aren’t doing at least $15k/mo per employee, you have too many. Many have a third too many!
- Too many brokered parts, not enough of your own inventory – If you are brokering more than 10% of sales in most cases, the $15k (#1) is out the window.
- Not understanding the true cost of goods, with period correct statements – Also, it’s critical that you project sales at time of purchase. Remember, as my good friend Jim Counts says, “ We don’t buy cars; we buy sales.”
- Lack of pay for performance -Come on, folks; many of your peers started paying their salespersons on commission over a decade ago, paying dismantlers by the car, drivers by the stop, and parts pullers and order fulfillment personnel by their performance.
- Failure to understand how much their current computer system is handicapping them – It’s unfortunate, but you don’t know what you don’t know. Sounds silly, but it is so true. Just minor advances in being able to price your parts, inventory better, buy just a smidgen better, (the list goes on and on) can save or make you thousands every month, and the cost isn’t $20 per day for a newer system, amortized over 3 years.
- Failure to plan – Very few folks have anything resembling a plan which includes operational and financial goals.
- Failure to get help – There are lots of peers, associations, and folks to help you out there.
I always say there are 4 hurdles to success. Who will get through them first–you or your competition? First, you have to realize that things are tougher. Everyone is getting that one. Second, you have to figure out what is wrong. Third, decide on a plan to improve. Fourth, execute the plan. Sadly, many folks don’t get past the first hurdle. In spite of this, those who are paying attention are doing very well; don’t let anyone tell you that it’s bad everywhere or that its ok to do poorly since “everyone” is. In every region of the U.S. there are folks doing well. Trust me, while you are wringing your hands, some of your competitors are doing well.
Next month: More good stuff from Chapter 3.
Remember, only you can make BUSINESS GREAT!
Please email if you would like me to send previous articles.
Ron Sturgeon is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf. He now manages his real estate holdings and investments, and does limited small business consulting. You can learn more about him at WWW.rdsinvestments.com (Click on “more about Ron Sturgeon”.) He can be reached at 5940 Eden, Haltom City, TX 76117, or firstname.lastname@example.org.