I was talking with a guy this weekend who now owns five companies. There are three sister companies, one other company in a related industry, and one is a commercial real estate holding company that holds the assets of the other four companies.
This guy’s been in business 20 years, is self-taught and self-made and has done incredibly well for himself. But that’s come at a price as he’s barely taken a vacation in the past 20 years and continues to work incredibly hard including 6 days a week.
As we talked and talked, it became apparent that no one was analyzing the business, analyzing profits, looking at cutting expenses, building financial models and the like.
At issue is the fact that he doesn’t have a controller or any other finance person other than his CPA who is doing the books and ensuring the company is profiting at the level it needs to. The guy did bring in a COO a year ago to try to move the company to the next level but it didn’t work out.
As a result of this lack of financial oversight, pricing for services is random and most certainly is not allowing the company to reach its maximum profitability because no one is looking at the competition and what they’re charging, nor are they looking at their internal costs to maximize profitability.
And the reason pricing is random is because the guy who owns the company puts the relationship with his customers above all else. Building those relationships is critical – it’s allowed his business to expand through word of mouth. But smart business has to come into play. The guy has to hire someone who can take the randomness out of the picture, and he has to figure out how to start transferring some of his relationships over to his well-qualified team who can maintain and build them.
THE REAL WORLD RETAILING TAKEAWAY
It’s okay to let a chauffeur drive the car.
So many companies hire people to come in and help figure things out. But then they don’t let the people actually do that.
In the example above, this guy is open to doing that which is only going to help increase his profits substantially and maybe allow even take a vacation once in awhile.
Presumably, the chauffeur know the best way to get there – that’s one of the reasons you hired them. Now figure the rest out. Do you need a chauffeur, a housekeeper, a cook, a landscaper? Who are the people you can hire that know their area of expertise better than anyone? Then are you going to hire them and let them do your job to free you up to do the things you want or need to do?
In the world of retail, the biggest need is a great store manager. Too many owners I know are great owners, but not the best at running the business. Go find the right person that’s going to make you concept shine.