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Fixing flat tires

Examining the four "tires" of your business

< class="regTxt">Is your business equipped for the ride ahead? Using a piece of paper, draw a rectangle with a small dot at each of the four corners. Then draw five spokes, each beginning at the center of the dot, equally spaced. What we have created is an imaginary car with wheels but not having drawn the tire around the spokes.

To this imaginary car—which represents your business as a whole—assign each wheel these business divisions:

  • Your salespeople and their abilities
  • Your management skills
  • Your customer service
  • Your finances

Allow me to explain how you will assess each tire using the spokes. Each division (tire) is divided into five sections (spokes), and you will rate each of those divisions on a scale of 1 to 10. The end of the spoke near the hub represents 1, a poor rating. And the outer end of the spoke represents a 10, an excellent rating. We will name each of the spokes and grade them accordingly.

You will mark the spokes at the appropriate level on the 1-to-10 scale. From the five marks you will now be able to create a circle (the tire). If you were to achieve a 10 in all five categories, the tire would be round and as large as possible. But if there were one or more areas that earned less, there will be a flat tire. If you scored a six on each of the five spokes, you would have a much smaller tire. Either way, your “car” will not run as smoothly or as fast.

For each tire, rate the five items.

Tire #1: Salespeople

  • Ability to create and respond to goals
  • Ability to communicate with other employees
  • Product knowledge
  • Dependability
  • Ability to accept and work with change

Tire #2: Your managing skills

  • Turnover of employees
  • Training of employees
  • The appearance of the displays within your business
  • Employee participation in management
  • Your product mix

Tire #3: Customer service

  • In the last year, have you had more or fewer complaints from your customers?
  • What do your employees say to your customers? If they are greeting the customer with the same, “Can I help you?” as many of your competitors do, then your business deserves a low mark in this category.
  • How many customers do you or your employees know by name? If it is a good percentage of your customers, you get a high mark for this.
  • Are a lot of your customers repeat customers? Then your fourth spoke should be a high number.
  • How many customers come to you by referral? If this happens frequently, you have satisfied customers and deserve a high mark.

Tire #4: Financial tire

  • Ability to read and understand all of the information on your financial statement. The more you understand, the higher the mark you deserve.
  • How much time does it take you to get your monthly financials? How quickly are they created? Do you have your January financials by February 5? Or are you getting to see them sometime in late March? Grade yourself accordingly.
  • Do you have a cashflow chart, and is it upgraded monthly? A cashflow chart will tell you how much inventory and how much cash is on hand for each of the 12 months in the coming year. If you have a cashflow chart, you deserve a high mark on your third spoke.
  • Do your employees understand business management? Too often employees believe that every business doubles the cost of an item to determine the price of the product, and is then netting between 10 and 30 percent. Experience has shown that employees are more likely to be team players when they are aware of how a business actually operates. Mark yourself accordingly on the fourth spoke.
  • What is your overall financial stability? Select whichever financial ratios you want, but in looking at five or more of the ratios, does your business earn a financially stable grade?

Now we have given your business a fairly thorough review. Does your “car” have a flat tire? In examining each of the tires, if you rated a five in every category, you do not have four flat tires, but four small tires. And a car/business with four small tires cannot move as fast as a car/business with four large tires.

As you examine the four tires, you will easily see where you have deficiencies. Devoting your time, resources and efforts to these areas will allow you to have your car in top shape and ready to go.

We have completed comparing your business to a car in which one of the wheels was your staff. Let’s take the exercise one step further by turning that one wheel into a car of its own and seeing how it “runs.”

Begin by creating a new rectangle and the five spokes at each of the four corners.

Why would you want to give your employees a more intense review? On a typical financial statement, after the cost of inventory, your employees are the most expensive line item you have. This will not be the first article you have read that tells you your employees can make a difference in the success of your business. Even a company that does all of its business through the mail and Internet can easily lose business if the employees are not taking care of the customers’ wants and needs.

One other interesting point about employees and their cost: when you lose an employee, for whatever reason, it will cost you between 40 and 60 percent of the annual wages to hire, educate and develop a new employee.

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This article is copyrighted by Tom Shay and Profits+Plus Seminars, who can be reached at: PO Box 1577, St. Petersburg, Fl. 33731. Phone 727-464-2182. It may be printed for an individual to read, but not duplicated or distributed without expressed written consent of the copyright owner.
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PO Box 1577
St. Petersburg, Fl 33731
(727) 464-2182
Fax: (727) 898-3179