There’s a term to describe companies that are growing and generating jobs: “Gazelles.” Some say companies like this will get our national economy back on track. How can you become a gazelle and grow to new levels? Be diligent about 4 decisions — people, strategy, execution and cash. If you fall short in any of these areas, you risk losing revenues, profits and time.
Many dealerships face continual challenges in all 4 areas. However, at any one time, the challenges in one area may overshadow the rest. Let’s start by digging a little deeper into these 4 topics.
People Add or Drain Energy
People challenges impact your success and can be a source of energy or an emotional drain. People issues can include conflicts with a partner; a supplier delaying your success; an employee that’s disrupting the dealership’s effectiveness; or even challenges in your personal life. Or, you might simply lack enough employees to serve your customers. However, I advise against hiring more employees to fix this problem.
Until you settle these relationship issues, they’ll consume a tremendous amount of emotional energy, making it difficult to focus on the other 3 main decisions. Focus on getting the right people doing the right things with clear accountabilities and metrics. Consider this strategy: Identify how you will measure success and what the expectation is for every position in your dealership.
Strategy Guides Growth
Strategy challenges are indicated by a slowing in top-line revenue growth. If revenue is not growing as quickly as you like, then it’s time to re-examine your strategy — what you’re selling to whom. It’s important to concisely articulate that strategy so you can align each employee, without wasting sales or operational energies on activities not useful to the business.
Jim Collins, author of Good to Great, calls this precisely articulated strategy a company’s “hedgehog.” Alan Rudy, founder of growth company incubator Into Great, calls it the “ping” of the business. (A growth company incubator helps companies survive and grow during the start-up phase.) Others call it a unique selling proposition (USP), differential advantage or brand promise. Whatever you call it, you know you’ve nailed it if revenues are growing as rapidly as you want.
Does everyone on your team know your strategy? First you must define it and then you must communicate it.
Tighten Your Execution
Execution challenges surface when your increased revenues are not generating increased profits. I’ve seen many firms triple their revenue because they have capitalized on a differential advantage, only to see their profitability drop because of sloppy execution.
The other indication of poor execution is the number of hours spent delivering products or services. When execution is haphazard, the organization has to rely on the “heroics” of employees working incredibly long hours just to keep the wheels from falling off the organization. By simply tightening up your execution habits, you can dramatically improve gross margins and profitability, while reducing the time it takes for work to be completed. A great place to start improving execution is to communicate who does what and by when. At a minimum, set a weekly update meeting with your team.
Calculate Your Cash Conversion Cycle
The last challenge is cash. The first law of entrepreneurial gravity, the ups and downs of a business, is “growth sucks cash.” I encourage companies to calculate their cash conversion cycle (CCC), which measures company wide how long it takes between when you spend a dollar on marketing, design, rent, wages, etc., until when you get that dollar back. The idea is to generate more cash the faster you grow. I believe all growth firms can accomplish this or at least dramatically improve their CCC and provide sufficient internal cash to fuel growth.
If you’re not familiar with how to calculate it, I recommend reading Neil Churchill’s Harvard Business Review article entitled “How Fast Can Your Company Afford to Grow.”
Now that you have a brief understanding of the 4 decisions, it is time to focus on which is most important to helping your dealership grow. Then, keep working until progress is made. Take action and keep growing!