The Money You Make May Be Your Own
My daughter and I have finally come to an agreement on how her finances are handled while she’s away at Ohio State: she tells me what she wants and I provide it! We seem to argue much less since we have adopted this strategy!
All kidding aside, at almost 20, her needs (and wants) are significant compared to just a few years ago. While it would never be a good idea as a parent to give your child everything they ask for…at five, at least you could do it because she thinks small! At 20, we needed a better plan. What works for us now is honest conversation where we both talk about needs, ability to pay, priorities, and value. By having this conversation, we seem to land at a place where all her needs and many of her wants are met, all within a budget I can live with.
This open dialogue is a strategy that can work in your role as an independent paint retailer. Not too many months ago, I mentioned here in this column that I wanted to hire an outside sales rep to help my business grow. I only own two stores so this move will undoubtedly have a significant impact; it’s expensive for me and incurs a fair amount of risk compared to my size. I felt like I needed a partner to help mitigate some of that risk and get me to a place where I could be comfortable that I was setting myself up to succeed while also controlling my downside, if for some reason the plan failed.
I set up meetings with my two largest paint vendors and told them what I was thinking. In short: I wanted to put a sales rep on the road and I wanted them to help me pay for it. I got the same answer both times: “If we do this, what is our Return on Investment (ROI)?” The good news here is that all those long difficult negotiations with my daughter had prepared me for this battle. ROI is the business equivalent of “what’s in it for me?” I knew going into those meetings that in order to ask for investment to help my business grow, there had to be something in it for them. I was prepared! I had sales figures from previous reps that we had, sales forecasts (a fancy word for guesses), and even presented their likely ROI. I put a specific dollar amount in my “ask” and then working backwards—assuming a gross profit margin for them that is around an industry standard—I was able to show them exactly when they would get their money back.
The rest was just the back and forth of the process. We had conversations about what percentage of the rep’s time would be spent selling their specific products versus other brands, what is an acceptable amount of time in the stores (“NONE…get out and sell” is what they want to hear), how we get reimbursed, and other fairly easy topics to wrap up. By far the hardest part of the project was finding the right candidate because the negotiations were fairly straightforward. It all worked, a nice partnership was formed, and our new rep starts December 4th!
If you’re reading this and thinking “that seems like a lot of work: I’ve never done any forecasting or calculating ROI:” you’re wrong! The major manufacturers have plans and dollars in place to help their dealers grow. Without either dealer count or dealer same-store sales growth, manufacturers that sell to dealers will have no growth themselves. And growth is what they all want! So they will help you through this process and tell you what they want. You just need to help them fill in some of the blanks.
“Dad, I reeeeeally need the new iPhone” is no way to start a dialogue any more than a dealer saying. “pleeeeease, can I have a sales rep?” But a straightforward conversation about needs and how those dollars invested will bring returns is the way! My daughter will get the new iPhone because for her, my ROI is her smiles and hugs. But a paint manufacturer will want to see dollars and cents! So be clear about what you want and even more clear about how they’ll benefit. Then you’ve taken the first step in growing your business…and better yet, with other people’s money!