Managing What You Manage
Jack Welsh, the highly regarded former CEO of General Electric, used to say, “You can’t grow long term if you can’t eat short term!” It’s hard to argue with that logic. And would I ever be so arrogant as to disagree with the man at the helm of GE while its stock price increased over 4000%? According to my ex-wife, I am that arrogant…and I think I’m about to prove her right! It’s not that I think Jack Welsh was wrong when he said that, it’s just that in the life of an independent paint retailer, I find his statement to be a gross oversimplification.
The food I am eating today (and with a daughter in college, food is almost becoming a luxury) was bought with money I made from my efforts before today! When I make a big sale is generally not when I make my money. No, it’s when I get PAID for that big sale that my daughter and fiancée seem to know it’s time to start circling around while complaining that they need new iPhones!
Even when you get that big “walk-in” sale, it may have happened today, but you were only able to make that sale because of work you did previously. You had the paint in stock because it was previously ordered, you were able to sell it profitably and at the right price to get the sale because you had previously negotiated with the vendor, and you were able to service the sale because you had previously hired enough employees to manage the traffic coming through your store.
So with all due respect to Mr. Welsh, I find myself advising dealers that “if you take time to manage your business for tomorrow, what you eat today will take care of itself.” Managing your business is different than managing your stores: even if you only have one store. And the difference between the two is no small distinction!
Even though my two stores each have managers, I still end up managing the stores from time to time. Whether I am covering a vacation or day off, ordering product if one of them is too busy, helping figure out how to deploy drivers, or counting out the drawer at the end of the day, I cannot take the day-to-day retailer duties totally out of my schedule. If you have one store, I suspect that you do even more of this type of work than I do. Don’t misunderstand me, these are crucial responsibilities and if your business is going to do well in the short term, you need to take them seriously. But no matter your day-to-day obligations in your store(s), you must take time away from managing your stores and spend it managing your business!
How much credit you give one particular customer may be a store manager level decision; but how much credit you have outstanding in total is a higher-level decision that you must leave yourself time to make. Losing control of their accounts receivables is one of the most common (and tragic) mistakes I see dealers make. By failing to manage the total value of all your accounts receivable, you can get yourself into a world of trouble.
Each month, if your A/R gets $10,000 larger because you fail to manage it well, you had better have that $10,000 on hand and ready to invest in your business or you won’t be able to pay your vendors and employees on time. Since total accounts receivable cannot be allowed to grow unfettered, you must leave yourself time to think about how much money you can afford in total, to put “out on the street.” Only then are you able to make the store manager type decisions of how much credit to give one particular customer.
Inventory is another area where you need to leave time to make business level decisions. How many gallons of Regal Flat Base One each store stocks is up to the store managers. But how much inventory in total each store has is my responsibility. I don’t set these figures arbitrarily nor do I “just let them happen.” I need to leave myself time to analyze my sales, look at the product mix, vendor delivery schedules etc. so I can make an informed business decision on inventory spend. By taking time away from managing the stores so that I can spend it on managing the business, I can assign a total inventory spend per store, a crucial decision, without getting into the less than crucial decision of how many 9 x ½ microfiber rollers we stock.
So while you need to spend time managing your stores today, always remember to take time to manage your business for tomorrow and beyond. Remember, it was also Jack Welsh who said; “Any jerk can have short term earnings!” So don’t be a jerk: run your stores like they’re going to be here in 20 years.