What is the right question? Anything that will get the other person to talk about themselves and their business. “How’s business?” doesn’t count. It is a required social opener, but we all know that the answer doesn’t matter. Once I get past the niceties, I am going to try to ask questions that will help me learn more about business. “What kinds of things are you trying to help grow revenue?” “What has been your biggest epiphany managing a business in the New Economy?” “What do you know now that would have helped you starting out?”

The first question is just the start. You have to follow up their answer with a probing question – to dig a little deeper into the subject. “What do you think causes that?” “What did you try before you discovered that solution?” “What did your employees think of your idea?” The next response in turn should trigger another line of questioning. “How do you think a company like mine should approach the same problem?” “What most surprised you about how that worked?” “Who do you talk to when you need to vet an idea like that?”

I have been on both ends of this kind of conversation. In its worst incarnation, I have been asked these questions by people who weren’t genuinely interested in the answers. They feign engagement and congratulate you on your success, but are trying to deflect you from asking questions of them – because they don’t want to answer. A successful conversation is where both parties are interested in each other’s questions and answers. You may have to ask a few questions to find out if you will have that conversation, but as soon as you recognize that the other person doesn’t want to share and isn’t interested in what you know – then move on. Ask the other person if they could introduce you to someone else in the room, then start again.

Networking is hard work, but the potential payoff is huge. Keep an open mind about learning new things and you will be amazed at what people will share with you. Don’t share everything though. Try to end the conversation with, “I’d like to discuss that further. Can I contact you after this event so we can continue down this thread?”

Now it’s time to go learn something! Talk to you soon!

The post Questions to Develop Listening Skills appeared first on The Stimson Group.

PS- This is a great companion video to the R&S Business Metric Survey!

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

The post Key Performance Indicators appeared first on The Stimson Group.

When I hear about companies that compete on price, I know that only one in ten is doing so on purpose. The rest are simply falling in line with pricing and strategies they didn’t establish and do not have control over.

“There’s no way our competition can make money at those prices!” - Beleaguered Managers Everywhere

Most every company has a cost advantage for a given set of circumstances. The first step in being an effective competitor is to know your numbers. The Rental & Staging Business Metric Survey Report provides critical data and analysis that will improve your business IQ:

Five Key Advantages in Knowing Your Numbers

#1. Know Your Costs

Costs of Goods Sold are critical calculations in project sales, but did you know that you have COGS even when you sell nothing? Most companies can estimate the direct costs involved to execute a given project or business transaction. However, savvy companies can also calculate their costs when they don’t win the job!

#2. Leverage Revenue Ratios

When pricing live events, the ratio of labor to equipment is critical. There is always a hard cost associated with labor, so it is easy to assume that is the best place to specify cost savings. But, labor pricing represents your differentiator and your greatest financial risk. What other services could you provide that would capture labor without looking greedy?

#3. Buy or Rent?

Of course it is preferable to own the equipment you rent to customers, but it is possible to own too much gear. And did you know that sub-rentals are normal in a healthy business? What is the most important metric for a rental-based business? I will give you a hint…it’s an extremely variable finance expense and your job is to keep it consistent.

#4. Capture a Bigger Share of the Customer

Your customer needs a variety of products and services. How many do you provide? Which ones would make a difference? There is a reason that highly profitable companies have 6-10 lines of business instead of 1-2.

#5. What Are You Worth?

In asset-based, highly capitalized businesses the valuation number that matters most is EBITDA. Do you know what yours is and how to improve it? What do high-value companies do differently from yours?

The R&S Business Metric Survey report has the industry data you have always wanted. See how you compare to other businesses your size and learn what profitable companies do differently. Learn more here.

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What do these Production Rental companies have in common? Here are my observations and how I help solve the problem.

1. One owner/manager can effectively supervise about 25 employees. Growing beyond this point requires a management team to divide the business disciplines. Finding that second or third person to split management duties is often difficult for owners and not everyone is ready to let another person make mistakes on their own.

2. Most Sales process up to this point involves Account Managers with project management responsibility. This severely limits the volume an AM can handle. In order to grow you would need to hire more AM’s, which brings us back to point #1.

3. The project management process is often silo’d with each PM running his or her own business. In order to expand, companies have to centralize shared services such as logistics, inventory allocation, and staffing. This requires more people wearing fewer hats – exactly the sort of things an entrepreneur tries to avoid during startup.

To break through all three issues requires significant realignment of responsibilities within a firm and 1-3 speculative new hires. Many owners aren’t willing to take those risks if they aren’t sure they have the right information or skills to succeed. Not to mention there are lots of finesse moves that have to occur like price management, job costing, commission plans, technical consistency, and…gulp…budgeting. What are the goals? How about increase overall revenue, reduce the amount of effort to deliver the product, and improve scalability so that more months are profitable? This all points to more profit. Really great things happen when you break through the stagnation barrier and move into the next phase of growth.

Here’s how I can help: There is a set of teachable skills and best practices that applies to this situation. However, companies this size have developed complex processes, interpersonal relationships, and job descriptions that can be quite unique. It is not enough to simply tell each person what to do. In order for them to be successful, we need to show how to make the transition. In the meantime, another person will have to allow changes so the first person can progress with theirs. Doing things in the right order is important, not to mention understanding how each change will affect other processes and personnel. If I understand the existing processes of the firm, I can help management prioritize and navigate each step, teaching each skill as it becomes important.

To understand how a company is wired I use what I call the Under the Hood process, which is a systematic review of key processes, the people who currently own those processes, and the business metrics that measure performance. Under the Hood doesn’t solve these stagnation challenges, but it does give me the insight into your unique situation that will better equip me to help you through the changes necessary for growth. Once I know how things work today and what your goals are, then we can design the plan that will achieve those goals in the shortest amount of time and cost.

Stagnation doesn’t happen overnight, and it won’t go away quickly either. But, we apply the things we know will work and modify them to accommodate existing personnel and processes, then we can increase chances for success while shortening the timeline. And if growth is not your goal, then the Under the Hood process can show you how to maximize profitability at your chosen business level. Learn more about this and the many other services I provide on my website.

The post What Stops Businesses From Growing? appeared first on The Stimson Group.

Sales Compensation

The survey covers labor costs for direct labor, sales compensation, and indirect labor. One owner in particular was concerned that his sales team was costing 25% more than the average for his company’s size. We reviewed his comp plan and learned that not only were his assumptions about what total compensation to revenue per salesperson should be for his business type, we discovered that his commission plan was encouraging the team to sell at lower margins instead of higher. You can learn more about compensation plans for sales staff in this article.

Booking Expenses

More than one manager has discovered from our conversations that key expenses have been mis-categorized in their own financials, undermining a specific initiative that was underway. For instance, one owner was pleased that his efforts to reduce trucking and shipping costs had brought his metrics in line with the industry, only to find that the bookkeeper had been posting fuel expenses to travel – thinking the charges were for automobiles. Another owner was sure that his Creative Department was a growing, successful part of his business – but discovered that Creative revenue was being over-recognized because the accountant thought that Production Management charges were Creative revenue. These owners have been reviewing inaccurate data every month and now know they need to pay more attention to where the numbers are posted.

Capitalization

CAPEX and Depreciation have been a major topic in our discussions. Several owners have learned that the best source for equipment financing is their own cash flow. S-Corporations have an advantage in leveraging non-cash expenses such as depreciation into cash for growth. It can be a huge mistake therefore to cut back on all capital spending in slower years, because that will just create a future cash shortage when business levels return.Want to learn more about how to decide what to buy? Check out this post.

Pricing

We’ve had many lively discussions about commoditization and product pricing in particular. One industry veteran was shocked  to learn that the rental price point of a new product had almost nothing to do with the purchase price. There is a now a mature wholesale market that sets the price based on demand, which affects ROI. This manager’s team is losing bids because his assumptions on pricing are out of sync with the market.

The post Lessons from 2012 Metric Survey appeared first on The Stimson Group.

Tom Stimson, consultant at The Stimson Group and head blogger at AVMatters.info talks about the decision criteria for assessing a rent or buy opportunity. 

Rent or Buy? This is a decision consumers make everyday. Do I want to own a 300 pound roto-tiller that I will use once a year or should I rent one? If I rent one, how will I get it home? How long will I really need it? Will I get the project done in one weekend? If you are a rental company, then the decision process for buying new rental stock is not all that different.

There are three main categories of need and each has a different decision criteria. As a consumer, would you buy a roto-tiller in order to be the only one on the block that has one? Yes? Then watch my video…

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InfoComm University Names Tom Stimson CTS to Adjunct Faculty

At Infocomm on Thursday June 13th  Tom Stimson will teach two business track seminars, one each for Systems Integrators and Rental-Stagers. This year’s theme is Business Strategy Trends in the Audiovisual Industry.

Why Should I Attend?

If you are interested in looking outside business as usual and discovering where innovation is happening, then join me for some lively topics: Low margins? Everyone has the same challenge, but some companies have figured out what to do about it. Flat sales? Maybe our assumptions about what sells is wrong? In both classes I will focus on the newest trends in how to approach everyday challenges. I guarantee you will be excited about the possibilities and will take home game-changing ideas.

I work on these courses up to the very last minute because I want to include the latest market intelligence, but here’s what I already know will make the cut:

IS058 – Business Trends in Rental & Staging; Thursday, June 13, 10:30-12:00

• Throw out your assumptions about rental pricing. There’s no more easy math for rental companies. Learn how competitors are winning the same job for more margin.
• What is a Content Garage? Learn why you need one right away.
• Real salesman are trumping your order-takers without knowing anything about AV. What do they know that you don’t?

IS070 – Business Trends in Systems Integration; Thursday, June 13, 12:30-14:00

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The Stimson Group convinced 33 well-known companies to share financial data in a way that allows other businesses to benchmark their results against industry averages. Some of the key takeaways of the Business Metric Survey report include:

• The Rental & Staging segment appears to be healthier than it has in years. Revenue per FTE has grown from $200,000 per FTE in 2011 to $211,000 in 2012 and EBITDA grew 35%. What these two facts suggest is that companies are operating with much higher efficiency.
• Average CAPEX spending is down slightly in 2012, but new equipment purchases are still ahead of 2012’s depreciation. In other words, management is dipping into profits in order to buy new equipment. This suggests that companies are expecting growth, but perhaps taking advantage of temporary tax incentives in the form of accelerated depreciation. Again, aggressive capitalization is a sign of overall better health in the segment.
• Over the past six years (Pre-Recession 2006 through 2012), our respondents have grown an average of 7.0% and project an average growth in 2013 of 7.9%.

“The Rental & Staging Business Metric Survey provides an invaluable set of data against which to baseline the performance your company to the industry at large.” - Todd Richards, CFO, Entertainment Lighting Systems

“I received tremendous value from the one hour phone consultation with Tom and came away with actionable ideas that can enhance the continued future growth and ongoing success of AV Chicago. Thanks again for a great experience!” – Edward J. Gomboz, President, AV Chicago

“These reports have allowed me to create a strategy with our management team to overcome areas where we may not be performing as well as other companies.” – John Watts, Vice President, Rental Services, AVI-SPL

“Thank you so much for the R&S Business Metrics Report and the individual consultation that followed. The simple fact is that the advice is great, and if some of it seems like common sense, it’s the kind of common sense that you don’t realize until someone says it out loud.” – Darren R. Sussman, Reid Sound, Inc.

“The survey asks the questions that allow you to pinpoint the strengths and weaknesses in your business. I look at it as my annual report card. I get to see how my decisions effect the company, and how we measure up to the rest of our cohorts in the R&S industry.” - Doug Murray, Upstage Video

“Each year I look forward to Tom’s financial analysis report because I believe that benchmarking is critical to any business serious about improving.  This report gives my team concrete areas to focus on to take money to the bottom line.” - Matthew Emerson, CEAVCO

“I have spent a lot of time with both  the industry and our specific results and am finding valuable information to use with both our internal strategic planning and with  some of our stakeholders.” - Chris Curtis, GoVision

“I find Tom’s annual survey to be a wealth of information.  From it we identify opportunities and then create the appropriate systems to improve company performance. The overall Industry Report is comprehensive and informative in an industry where this type of analysis is lacking.” – Chuck Fleischacker, CFO, Intelligent Lighting Creations (ILC)

Tom Stimson, President of The Stimson Group comments, “This is information I could have used when I was managing companies. The question that should be on every executive or owner’s mind is ‘How are we doing compared to how we should be doing?’ Now any manager that is focused on results can have access to timely data.”

The complete report is now available for purchase online at http://trstimson.com/media/our-products/

About The Stimson Group

The Stimson Group helps organizations plan their next steps through facilitated Strategic Planning, Market Research, and Process Improvement. Company founder, Thomas Stimson, MBA, CTS has spent over twenty-five years in the Audio Visual and Live Event industries and now offers his management expertise and experience to companies that want to grow and prosper. In addition to his consulting practice, Mr. Stimson has written over 100 articles on business practices and industry trends and is a regular keynote speaker and instructor. Learn more at www.trstimson.com.

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