Question Masks Real Issue

I learned early in consulting that when owners self-diagnose, often true issues are hidden. In fact, one of the criticisms leveled at consultants is their solutions are so simple that “anyone could have said that.” Sure, solutions are simple. Where a good consultant earns their money is asking good questions so that real problems can be defined; not in just providing solutions. My last post was a great example of this phenomenon when my printer-friend asked, “What percentage of sales should rent be?”

I thought, “Why do you suppose the owner asked that?” So, after I responded (5% to 6.5% with a typical of 6%, which is up from 4.5% over the past five years), I asked the obvious, “Why do you ask?”

And now we get to the rest of the story.

The owner wrote back, “Thanks so much for the information. I was looking back over previous years P & L’s (pre-2007) and saw that rent was running around 7% of sales. Since 2009 my rent has been at 10% of sales. This can be attributed to lower sales volume and rents increasing due to the terms of the three year contract I signed when I purchased the company.”

“My reason for trying to get a percentage of sales number was due to my need to renegotiate the terms. My landlord came back with a proposal that would reduce my rent to around 8.5% of current sales. I agree with your statement that I may have more square feet than I need given my current volume. My problem is that the new terms require I sign for three years with an escalation in rents clause over those three years.”

“In this economy and given the outlook, who knows where we will be in three years? I may want to move to a smaller space or sell/merge with another printer into their larger facility and then I will be stuck in a binding contract. The obvious answer is to go get more sales, easier said than done … Again, thanks for your help. I hope to one day get my volumes and cash flows back up to acceptable levels so I can join your group. For now however, I feel like the “Dead Printer Working” that you so often describe.

So what’s the real problem? The printer’s question was about a benchmark in helping to renegotiate his lease with the landlord. That’s valid but why was he having a time renegotiating his lease? Well, as he later told me, his sales had decreased by half in the last five years. That meant his rent doubled as a percentage of sales and I’m sure everything else was squeezed cash-wise as well.

Now what’s the printer’s reaction to it? In this case he’s putting the squeeze on the landlord to reduce the rent because the print shop’s sales are down. How come the sales are down? Well, I don’t specifically know for sure but can give a fair guess: sales are down because he’s not doing a lot about it.

Oh, yes, we hope and wish for better sales, but unless we actually do something about it; unless we specifically spend our time on selling activities, we’re not doing anything about it.

Well, and again I’m guessing here, but he can’t spend more time on selling activities because he’s got too many other important things to do. Like what? Well, get jobs out, pick up paper, deliver jobs (no, that doesn’t count as a sales call), answer the telephone and more.

In short, he doesn’t have time to sell.

And that’s for two reasons.

1) He doesn’t make time to do anything, rather reacts to whatever happens. This is most typical of small business owners regardless of their type of business. We don’t accomplish important projects (in this case selling activities) because we can’t dedicate “heads down” time to any specific project. And the reasons for that are many.

They can range from workers not being trained to do specific tasks (can’t set up the folder or can’t price jobs or whatever) to the owner self-inflicting their own wounds (owner has to price all jobs because no one else has the touch which, in turn, really means the owner hires people to stand around and watch them work).

Answer I often use here is to work with owners in establishing a weekly time planner. Yup. You can actually plan your day within reason. Specifically you plan for interruption time as well as heads down time. And then you work to eliminate the reasons why you can’t stick with it.

There’s too much to this to go into it in depth here, but if anyone’s interested, let me know and I’ll write more about it later.

2. He or she doesn’t want to sell because he or she doesn’t want to do it. Why? Not trained in “how” is the most common reason but it’s not the only one. In straightforward cases, most implement a plan once they are trained and know what to do and why.

Notice I said “most” though. Occasionally, you will find owners who have a deeper reluctance or a reluctance based on other reasons. Good news here is that there are tests for true reluctance as well as proven remedies and training for the various strains of reluctance. Yes, I will write more on this soon as well.

Let’s go back to our friend, though.

His real problem is that his sales have dropped by half and he didn’t really do a lot about it. What he was doing was focusing on the symptoms (lease was up and landlord wanted more rent).

Even worse, that’s about to lead him into a really bad decision. Again, he wrote, “I may want to move to a smaller space or sell/merge with another printer into their larger facility.”

Moving to a smaller space is logical given the right conditions (not impacting sales that much and an immediate bounce back in sales isn’t imminent).

Getting married to another printer, however, can cause many more problems than high rent. The merger of two weak companies does not make a strong one. Additionally, figure at least $1 million in sales per prime family living out of the business to prevent cannibalism. There’s more but that will do for now.

And a final word; he mentioned, “I hope to one day get my volumes and cash flows back up to acceptable levels so I can join your group. For now however, I feel like the “Dead Printer Working” that you so often describe.”

Well, lots of folks feel this way. In fact, some of my best clients felt the same way before they sought help, but really what they found was that you can’t wait until your volume and cash flow improve to seek help to get your volume and cash flow up. That makes as much sense as waiting for your cancer to subside so you will have strength enough to drive down to the hospital.

The purpose of our programs is to help owners with cash and time issues. If you want information on the particulars in your case, send me an email to tom@crouser.com.

Okay, I made some recommendations to our friend which did include getting some professional assistance. What’s important for the rest of us is the point that when we treat the symptoms, we often miss the problem. In this case the printer was dealing with a symptom (rent was getting too high as percentage of sales) instead of the real problem (significant drop in sales and not doing anything about it).

In the meantime, thanks for asking….

Tom Crouser

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