With the holiday season just behind us and all the frantic rushing at low ebb, it is a good time to take stock of your business and your goals for the coming year(s). With everything you have to keep track of—marketing, chasing work, estimating, competitors, pricing, personnel and your bottom line just to name a few—it is easy to get caught up in trying to do a little bit of everything and doing most of that badly.
Take the time, right now, to sit back and take a hard, critical look at your business: what it is now and where is it going. Obviously, if you are in business today, you are already a risk-taker and an entrepreneur, so leverage your “can-do” attitude and make your business better than it was.
There are basics that every business, no matter how small or large, must do well to thrive or just survive in our present economy. Improving those areas where you are weak, while perfecting those areas where you are strong, will pay big dividends in the long- and short-term.
Getting focused on $ucce$$
Figuring out what to focus your attention on isn’t nuclear physics. Do a mental review of the areas of your business that give you the most heartburn and you’ll quickly find what you are looking for. Let’s not go with labor, which is the easiest to pinpoint and is almost a universal issue in the trades. Rather, while you can focus on that, chances are that you will spend a lot of time on something that is too fluid to make any long-term inroads in improving. Not to say that manpower is not an issue worth focusing on, it just isn’t the one that you can improve quickly in the short term. How about tightening up the things that make, and cost, you money?
What do you know about inventory and inventory control? Whether you are a service shop or a major commercial/industrial contractor, that is an area where a little attention can make a big difference.
Focus on Inventory
Almost everyone in our industry carries inventory of one type or another. Inventory is referred to as stock, stock on hand or as par. Stock is what you have on hand to sell. Do you have an inventory list? Does it show you—one by one and cumulatively—what you have on hand? Do you know what has been around a while and what moves quickly out of your shop? How long does it take to get your material (lead time)? If you are working on large projects and stock by the job, do you order per a takeoff, or in bulk? If you order in bulk, who keeps track of where the overstock goes and how it is tracked?
Let us take the example of a service/remodel shop. Having stock on hand is a must both for restocking service trucks and for walk in customers (if you cater to walk-in trade). How long will you have those old, outdated faucets on your shelf? How about valve stems and faucet parts (do you still use replacement parts)? Are you still carrying parts for things that are not only out of date, but have become rare? Freshen it up a bit. With the advent of computing power there is no longer an excuse for not having some type of inventory control program.
Anyone with a modicum of computer savvy can make a rudimentary inventory control program using Microsoft Excel. Want more bells and whistles? There are dozens, if not hundreds of reasonably priced, prepackaged inventory programs for PC’s and Macs. I believe that there are also many “free” inventory control programs available on the web, but since I’m retired, I don’t know much about them.
Whether you monitor it yourself or have a program that is totally automated with bar coding and scanners, a timely, manual stock review is an absolute must. Most suppliers shut down annually near their fiscal year end for a complete, “count it out, one-by-one” inventory. If they do it to keep track of their stock, you can and should do the same. They also use it to help accounting determine their “net” worth. Ask any accountant about the value of a good inventory control program and they will tell you that it is a hard asset that, accurately priced, can improve your bottom line, especially when it comes time for borrowing money or credit lines. Knowing what you have on hand, what moves and what doesn’t, can be a big money saver for a contracting or service business.
You want to tighten up your business model moving forward? Focusing on inventory is a great way to make a tangible improvement, save you a few dollars and get you headed in the right direction. Once you have that aspect under control, you can think about other areas that might need improvement.
