News: Collision Industry Icon Jeff Silver Passes Away
Well, it’s the start of another “new” year, and as such, a time for some brief reflection on, or review of, last year’s performance — and then on to launching the new business plan. After all, haste makes waste and, by the time you read this, we’re well into the new year already. So, it’s time to put the new plan in motion and get going on the implementation of the new processes, new policies and new programs – all designed to make you better at what you do. You do have a plan, right? How about a forecast? Anything?
Certainly, and it would come as no surprise, all or most large-scale, multi-location shops have a very clear understanding of what they want (or, are being asked) to accomplish in the coming year. A business plan is firmly in place, expectations are thoroughly understood and business goals have been clearly established and communicated across the organization. If these basic business practices aren’t being utilized by these large-scale businesses, then apparently their “plan” is to fail. But what about the smaller-scale shops, those under $500,000 in annual revenue? Have they taken the time to forecast their business? Do they have a business plan in place? Have they established specific goals and identified the most efficient ways to achieve them? If they haven’t, then failure is even more likely (than the larger scale shops), and will happen more swiftly.
Let’s assume, though, that all shops, regardless of size, have a comprehensive business plan in place for 2007 and beyond. And, those plans are filled with the basic sales and operational components (i.e., monthly/annual revenue goals, vehicle turn rates, paint inventory levels, equipment depreciation, etc.). With these basics in place, you have a solid foundation for considering other valuable business goals and measurements like customer retention and employee satisfaction.
If you could measure customer retention, you could plan to work on retaining more customers and building the highly profitable realm of customer loyalty. In 2005, RightNow Technologies published, “The Loyalty Connection: Secrets to Customer Retention.” In it, they studied the contrasts between the customer’s view and the business owner’s view of why customers leave (or, don’t return). One startling pie chart revealed that 73% of customers, according to themselves, don’t return to a business due to poor customer service. Yet only 21% of business owners perceived that to be the reason customers don’t return. What a discrepancy!
And what about employee satisfaction? Have you ever thought to measure it? If so, how could you do it? I don’t have an answer for that, but I do have some motivation for trying. A Cornell University study estimated the total cost of losing an employee at 30% of the employee’s total compensation package, while other studies have pegged this figure to be as high as 150%! If you take your business’s entire payroll figure and multiply it by the more conservative 30% figure and then multiply that by the number of employees you typically lose in a year, you have a relatively good idea of how much it costs you annually to search for, hire and train new employees, and recoup the lost productivity. This doesn’t even take into account how much a disgruntled employee’s actions on the job may affect your ability to retain customers. Thus, the customer retention/employee satisfaction relationship comes full circle.
So, is having a robust business plan enough? Or, is there a significant need to incorporate more esoteric business measurements such as customer loyalty and employee satisfaction? Based on some of the preliminary evidence revealed above, a case could be made for taking the time to incorporate some of these additional measurements. But certainly, they shouldn’t come before the solid foundation of a basic business plan is firmly in place.
Make it a great year!