Independent dealers, national suppliers, and manufacturers need to shift their tactics as the downturn’s headwinds let up. Like a boxer who knows he is on the verge of being knocked out, they are flailing about in the hopes of landing a lucky punch. Getting back to management basics is key and is as much about being poised to react as it is about showing calmness and direction to stay alive to fight another round. Here are a few moves to get you started.
• Study your accounts receivable. This is where customer service issues tend to first manifest because when a customer has an issue, guess what? He doesn’t pay his bills. Go through it line by line to spot trouble and take action against slow-paying accounts.
• Walk your locations. Face-to-face chats with drivers, loaders, and inside-support people let executives take their business’ pulse and see for themselves what’s going on.
• Get rid of slow-moving merchandise. We use eBay, Craigslist, and conventional advertising to push out slow-moving and DOG (Deleted, Obsolete Goods) inventory. But the most effective response has been to bring it out of the warehouse and put it up front where it can be seen.
• Change your goals, if you need to, and encourage innovation. Each year, the management team and I develop a detailed business plan with company and location initiatives. We review these at our monthly profit and loss meetings, modifying or adding to them as needed. If halfway through the year we find an initiative is not working or is improbable, we’re ready to eradicate it and move forward.
• Be transparent with managers about pricing objectives. The management team and I sit down each month to set commodity pricing at all levels based on a weighted gross margin program. Our location managers retain the power to change pricing in response to competitive situations, but it’s vital that they understand the real direction of our pricing. When a competitor quotes a ridiculous price on an item, I find that in most cases it’s out of ignorance.
• Review the transaction journals with margins. This is one of the late-afternoon duties I’ve assigned myself. Reviewing these will tell you if the management team is, indeed, following your pricing guidelines. If I have a question on a transaction, I’ll send a note to the location manager. Plus, reviewing them will keep you in tune with the marketplace.
• Communicate guidance and good news to your staff. As business leaders, we sometimes forget that the downturn has been stressful on a lot of our employees, and keeping them informed and encouraged with a few uplifting words is so important. Never underestimate the power of two words: thank you.
Don Magruder is CEO of Ro-Mac Lumber & Supply in Leesburg, Fla., and a former chairman of the Florida Building Material Association.
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