CONTROL, WHAT CONTROL?

By Peter Cox July 06, 2018 Money Matters

There is way more to running a successful, profitable and cash flow positive hardware operation than experience and in-depth knowledge of the local market...

Writing for this publication over the last 20 years I have been asked on a regular basis where I get my article ideas.

On my travels around New Zealand’s hardware stores is where.

Unfortunately, the article ideas don’t necessarily come from what I see being done well...

This time, I want to outline the importance of owners and managers controlling what they can control.

I have seen too much time wasted in this industry worrying and discussing problems over which you have no control, such as:

  • Weather (drought and floods).
  • Population movement.
  • Government taxation policy.
  • Government regulations.
  • Foreign acquisition and immigration.
  • And then there are special cases – for example the US tariffs on steel imports etc.

All of the above can certainly affect your cash flow and profitability but, instead of worrying about the possible impact on your business, let’s take some time for a reality check.

 

CONTROL WHAT YOU CAN CONTROL!

On a recent visit to a well-established hardware store with a great client base – but which was struggling from poor cash flow – it was evident that the owner and managers did not know:

  • What a bank reconciliation was.
  • Had never seen a listing of outstanding debtors and did not have a credit policy.
  • Did not know what creditors were due to be paid.
  • Had no profit and loss or cash flow budget.
  • Had no forward inventory planning targets.
  • Did not know the hourly rate per staff member.
  • Did not produce a monthly Profit & Loss (P&L) and balance sheet.
  • Had no benchmarking exercise based on my four simple monthly KPIs (Cash Cycle; Stock Productivity Index; Margin of Safety; and Return on Investment).
  • Were unaware that no statements had been sent out to the debtors for the last three months.
  • The book keeper was the sole contact person with the bank.
  • And they were unaware that all staff had online access to the store’s bank accounts during and outside office hours!

I could go on!

 

HOW TO TAKE CONTROL

Now don’t get me wrong.

I am not saying the owners and managers of this store were incompetent.

The reason their business was potentially viable was that their level of knowledge and experience in hardware and building supplies was outstanding.

It is just they had never been trained in business management.

In New Zealand, like Australia, all you need to open or take over a hardware store is an idea.

So, if you fall into this boat, where to from here?

My first suggestion is not to rely on your external accountant, particularly if their knowledge is limited when it comes to hardware stores.

Secondly, do not place total reliance on the bookkeeper – if they leave, no-one will have an idea what they did or how they did it.

It may also serve you well to talk to your local business or regional development office or the group you are with about short courses on management control.

Also, do contact your software provider for support. After all, that is (or should be) a large part of what you are paying for.

Again I say don’t get me wrong.

I am full of respect for the many people I have met over the years, for their experience and for their in-depth knowledge of the local market.

It’s just that there is way more to running a successful, profitable and cash flow positive hardware operation than that.

So, do yourself a favour and take control! 

 


Peter Cox has spent over a decade training and consulting in the retail hardware industry. He has conducted key-note addresses, and management and sales workshops, which are aimed at improving profitability and liquidity in one of Australasia’s most competitive retail environments. Visit www.petermcox.com.au

 

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