PART II: Setting Strategic and Tactical Goals for Success.
So, how do you implement innovative and systemic changes to help your diesel repair shop succeed? You begin by establishing goals and utilizing strategic, project-based budgeting. Every system needs to have an end goal that can be measured and analyzed, so you can evaluate the effectiveness of your systems. Goals should focus on achieving higher performance and sustainable growth.
Your goals should follow the “S.M.A.R.T.” Principle. They must be: Specific; Measurable; Achievable; Realistic; and Timely.
Depending on your particular situation, some strategic goals you might set for your diesel repair shop may include:
- Increasing Revenue
- Increasing Net Profit
- Creating Positive Cash Flow
- Customer Retention or Satisfaction
- Strategic Alliances
- Increasing Productivity
- Debt Reduction
- Developing New Products or Services
- Recruiting Better Talent
- Reducing Risk
- Training lower cost people to perform higher value work
In order to accurately measure the results of systems and processes, you must also establish Key System Indicators (or KSI’s) for the core business functions that drive your goals. Gathering and analyzing accurate and timely data input is a key requirement to understanding the effectiveness of your systems.
The core business functions you should establish measurable, strategic, and tactical KSI’s for, include:
- Marketing & Sales
- Human Resources
- Information Technology
Examples of Tactical KSI’s for Marketing and Sales include:
- Leads Generated
- Leads Converted to Estimates
- Estimates Converted to Sales
- New Customers Acquired
- Number of Repeat Customers
Examples of Tactical KSI’s for Operations include:
- Direct Payroll to Sales
- Material/Inventory Control
- Number of Jobs Completed or Units Produced
- Production Cycle Time or Time in Process
- Product/Service Quality
Examples of Tactical KSI’s for Finance include:
- Accounts Receivable
- Accounts Payable
- Measurable Return on Investment
- Job Costing/Profit Analysis
- Expense Control
- Ratio Analysis
Examples of Tactical KSI’s for Human Resources include:
- Number of New Employees Recruited
- Employee Retention and Turnover Rate
- Injury Reduction
- Employee Complaint Reduction
Examples of Tactical KSI’s for Information Technology include:
- Technology Upgrades
- Productivity and Efficiency Enhancements
- Error Reduction
These are all tangible and measurable KSI’s. They can be easily tracked and measured using scorecards and software programs like Outlook, ACT and others. By establishing KSI baselines, you will be able to identify the positive and negative variances as you track and measure them over time. This will provide you with the knowledge you need to make changes and improvements to correct them.
Understanding and managing KSI variances is the most important job of your Management staff to reduce the risk of failing.
Don’t Fall Below the Redline
The sole purpose of taking an Entrepreneurial Approach to running your diesel repair shop is to avoid complacency that will put you and your business at risk of failing. You must do whatever you can to achieve sustainable growth, because it won’t happen on it’s own, unless you implement strategic, systemic changes.
So why is Sustained Growth so important? The chart below illustrates that if your repair shop Revenues are flat (indicated by the purple line), and Costs increase by only 3% (indicated in green), then Profits will decline as well (as shown in red).
(Examples of Costs: Energy, healthcare, wages, taxes, rent, general expenses, etc.)
Other key benefits of systems development and innovation are; reducing the risks of lawsuits and increasing long-term organizational growth.
Here are some of the top concerns and risks affecting the ability for most repair shops to stay above the Red Line.
Risks in Sales & Marketing are:
- Flat or declining sales
- Not enough new customers
- No effective marketing or sales strategies
- No brand awareness in target market
- Loss of a large customer
- Declining product or service demand
- Not keeping up with innovation or customer needs.
Risks in Management are:
- Lack of effective, proven systems, policies and procedures, causing confusion and poor productivity
- Inadequate job status reporting, resulting in unknown problems
- Outdated job descriptions or organizational charts, resulting in lack of employee direction
- Litigation and lawsuits caused by employee errors
- Not having the right people in the right positions, causing poor performance
- Lack of control across key business functions
Risks in Operations are:
- Lack of labor capacity to secure or complete work and sustain growth
- Inadequate employee training programs, resulting in poor quality work
- Outdated technology or equipment failures
- Slow work pace or failure to meet deadlines
- Losses on jobs, outnumbering profitable jobs
Risks in Finance and Information Technology are:
- Running out of cash and credit
- High overhead and low gross profit, causing negative net profit
- Slow collections or uncollectable accounts
- Lack of quality or timely data
- Lack of taking action to resolve financial variances
Most Diesel Repair Shops that failed had the following in common:
- Stopped monitoring KSI’s and correcting key variances
- Had no transition plan
- Didn’t have the right people in the right position
- Incurred too much debt
- Slowed down or abandoned systems development projects
- Lost large accounts
- Became complacent, until it was too late, and fell below the Red Line
Successful diesel repair shops utilize an Entrepreneurial Approach of systems development and innovation to improve performance and reduce risk, and apply this knowledge to actionable measures to achieve the goals they set for their business. These initiatives are called “Strategic Growth Projects.” In Part III of this blog series, we will discuss Strategic Growth Projects further.
In this three-part, weekly blog series; “The Entrepreneurial Approach to Running a Diesel Repair Shop”, we will share more information on how you can adopt an Entrepreneurial Approach to make your diesel repair shop more successful.
Please visit our blog page next week for “Part III – Implementing Strategic Growth Projects.”