We hit a goldmine! I heard some classic observations “from the heart” from my client – after years of struggle and toil. It was amazing!
Our weekly meeting started with an update as usual. It’s a bit slower now because it’s that unique period between Thanksgiving and Christmas – where some customers hurry up and place an order because they need to clear their expenditure budget before the end of the calendar year and still others take it easy and hold off until the turn of the year.
So, I heard that things are a bit slower. I heard that my client found an old building with about four or maybe five extensions added from the 1940s all the way to just a few years ago. The building could be purchased for about half the cost of the new building – but upon reflection it has some negatives like pillars and posts interspersed throughout the floor plan – although it is all on a single level! Even with some renovations and the...
This week I caught my client returning from a site visit to a newly acquired shop. He was in the truck on the highway and so we had a good talk.
The main thing is inflation.
In his view of the world the inflationary effect on his business has been 12% in the past year. This is different than the official pronouncements of about 6.5% inflation. I put the difference down to a variance between a consumer basket of goods (6.5%) and the actual input costs such as wages, insurance, raw materials, etc. (12%).
Still the point is – what to do?
A big debate going on now is whether the current inflationary pattern is caused by monetary policy OR by money flooding into the market over two years of a pandemic.
Don’t be fooled by that dilemma. It’s a trap. The problem this is creating for a business is the same in either case – shrinking margins.
This week we can see the follow-through or, you might call it, the after effects, of putting together a few acquisition deals, arranging financing, closing the paperwork, doing the due diligence, figuring out new pricing, protecting your margins, and otherwise taking care of organizing the work flow and arranging the equipment in the way you want your production line to work.
The story is short but you can get a feel for the linear, sequential order of things and the non-linear, parallel moves order of other things.
HEADLINE: This “empire”, this group of shops, is now complex and interwoven! Because of this we will begin to see great efficiencies and internal advantages for shifting equipment, people, and, of course, capital between and among locations.
At this point, at week #40 of 52, the empire has grown to the point where there are intricate relationships forming between the locations/shops. This brings about a kind of internal dynamic that is hard to see unless you understand what is going on. It’s subjective and not really quantifiable. Yet it actually helps the bottom line and speeds up the business response.
What is in place now? There are two locations, two more under short term consideration, another one in possible longer term future consideration, and still another one that the client did not acquire but from which equipment and revenue has been achieved in a creative way.
Here are some examples:
Today’s topic: Can a new acquisition deal just drop into your lap?
While continuing along with the acquisition of that new shop located just outside a major metropolitan area – the one where the current owner was in the process of buying it from the previous owner and where the current owner has some IRS tax trouble, and has actually stopped making payments – another deal fell into his lap. I’m not kidding.
I promised you last time that I would tell you what I would do in this case.
I would do the deal by taking action in two ways:
FIRST, I would urge the two parties to make a deal in the sense that one is not getting paid (and it looks like he will never get his full price) and the other one is not making payments (and it looks he will never be able to continue payments and of course will lose whatever he’s already paid). So, get real and do a deal!
SECOND, I would get my own ducks in a row and start to plan out how to grow the...
Today’s topic: ANALYSIS or GUT FEEL?
One of the biggest challenges in business is the analysis you need to do for an acquisition.
I’m speaking of financial simulations, margin calculations, pricing policy, inventory and cash flow, invoicing and collections policy, and so on.
You might be tempted to pull out your spreadsheet and perform all sorts of detailed scenarios such as simulating the life-time value of a customer and bringing that value back into a present value calculation so you can compare this acquisition to the others or to do a high-low calculation on your belief about its revenue generating capability.
Or you might calculate the sales cycle currently in place at the location and compare that to all the other locations you are studying.
And then you might compare that to various scenarios of shortening the sales cycle by using clever closing techniques or more intensively using more sales people, more route drivers, and a fancier...
Headlines: CONCLUSION. ANNOUNCEMENT. FINALIZED CONCEPT.
“The main conclusion from today: In-house manufacturing in ONE YEAR and $2.0 million in financing needed.”
More on this in a minute!
In this week’s session we also discussed the state of the business at HQ, the new acquisition, the equipment purchase from the “not acquisition”, and the possible acquisition from the shop located near a major metropolitan area.
It was an update but a really satisfactory one because all seems in order.
Great news – things are going along smoothly, which is an indication that the prudential decisions leading up to the purchase and opening have all proven to be good and sound.
We also talked about the great advantages of making your own products in-house. This is definitely a focus that we will be hearing a lot more about.
Here is my coded language for various locations:
HQ = headquarters, the home location, so to speak.
C = the newly acquired...
Because we had a short week, so to speak, today’s update is short and sweet.
You could summarize it as follows:
Customer Discovery is a valuable addition to the sales tool kit because it is an in-depth process of dialogue with a potential, existing, or past customer that takes place outside the context of a sales pitch. It reduces pressure and invites candid commentary mainly because it takes place outside the sales process. The customer will feel more likely to comment, provide reasons and explore scenarios with you if there is no pressure to sell.
The best person to do customer discovery calls is the CEO – the leader of the business. While it is certainly acceptable and even possible for the head of sales or head of marketing to do customer discovery interviews, the greatest chance for powerful input lies when a leader speaks with a leader.
Booking a customer discovery call is challenging, for a couple of reasons. First, everyone is busy and no one has time. Second, there may be a lingering suspicion that an invitation to a customer...