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By Diane M. Calabrese / Published December 2017
Tradition meets good business sense as members of our industry look forward to 2018. Planning hews close to the dictionary meaning of the word itself as owners develop strategies for doing, making, and arranging.
For many owners, the approach taken this year matches one followed successfully in past years. “We will plan the same as previous years,” says Jeffrey Paulding, president of Dirt Killer Pressure Washers Inc. in Baltimore, MD.
“We have a budgeting process that we start typically in November,” explains Paulding. “I identify the goals for the year as well as all of the programs of discretionary spending. That is spending other than required things like rent, phone, salaries, etc., that you need to keep the business open.”
In the discretionary spending category, Paulding puts things such as advertising, trade shows, and websites. “Most of the discretionary spending has to do with marketing and capital improvements to the business,” he says.
Forming the foundation for Paulding’s process is a quantified look at the past. “Over the years, I have developed an elaborate budget spreadsheet,” he says. “The first thing I do is feed in the previous year’s historical data. This includes the breakdown of sales by product group and the gross profit for each product group.”
When the sales and cost information from the previous year (or year to date) and an extrapolation as to what the same figures will be for the next year are in place, Paulding enters fixed and discretionary program costs. He cautions that it is much easier to extrapolate—always something of a guess—when an owner has collected a great deal of historical data.
Using the spreadsheet enables Paulding to project a profit figure for the next year. “Based on that figure, I make adjustments to the budget until I am comfortable with the plan.”
Each owner must carefully weigh unique factors that could bear on the business in 2018. The factors could be internal, such as product or personnel changes, or external, such as condition of the economy at a local, regional, national, or global level.
Paulding explains that he takes in all relevant internal and external factors. And more. “For my company, since we are the importer of Kränzle pressure washers from Germany, I start my planning process by guessing how the foreign exchange rate will change over the next year.” The rate has a direct impact on costs because the imported washers are purchased in euros.
Those new to planning must find a method that works best for them. “I am sure every company approaches things a little differently due to their market and internal factors,” says Paulding.
Perhaps the biggest obstacle to planning for 2018 is finding the time—and corresponding space—to do so. For some owners, putting a distance from the day-to-day activities at a company for a planning group is a good way to carve out the hours for focusing on what-comes-next.
“This year I am planning to do a one- to two-day retreat for strategic planning,” says Michael Hinderliter, president of Steamaway Inc. in Fort Worth, TX. “I did this in 2015 to plan for the coming year of 2016. It yielded good results. Unfortunately, I let it slide last year, so I am getting back on track this year.”
Whether offsite or on, the basics of good planning remain the same. “Our planning will encompass a broad range of topics and goal setting for the new year,” says Hinderliter. “We will do a SWOT analysis—sales goals, etc.”
SWOT, the acronym for strengths, weaknesses, opportunities, and threats, is a convenient reminder of the scope of elements to consider when making a plan, whether for 2018 or the next five years. The U.S. Small Business Administration (SBA) offers frequent webinars in strategic planning, including SWOT analysis. (See the SBA.gov website to review webinar opportunities or read transcripts.)
Identification of the where and when for planning are not the only ways space and time become important in the process. The physical distance between manufacturer and supplier, as well as the time it takes to transport it, add to the factors that must be considered.
There’s a dynamic and somewhat unpredictable interplay between external and internal forces when preparing for the next year. Planning is about trying to account for all the variables, even though uncertainty remains.
“Baren’s Inc. planning, as a wholesale supplier, is contingent on many factors out of our control,” says Dave Hildebrand, vice-president of the company, which is based in Seneca, PA. “We have to be responsive to
the needs of our customers, most of whom are purchasing pressure washers from various OEMs [original equipment manufacturers].”
Being responsive requires knowledge of movement of products. “We need to be aware as to what pumps and accessories these manufacturers are utilizing, so we can change our stocking needs,” explains Hildebrand. “As with any other supplier, we need to study our product movement to determine which products are selling well and which are not.”
The first question a customer usually asks about a part is whether it is available. The second is, how long it will take to get it. The second is not always an easy question to answer. Economic strength and increased productivity can move ahead of ability to move product. The product may be available, but it must compete for space on transport vessels or vehicles.
“As an importer from Asia, we need to understand any changes in shipper availability in order for our products to arrive in a timely fashion,” says Hildebrand. “In 2017 we, along with other suppliers, found the overseas manufacturers were operating at full capacity, but with fewer shipping vessels available, some of our shipments were delayed. This is something we must take into consideration for 2018.”
As businesses identify their strengths and weaknesses as part of planning, they tap historical data on their company’s performance and commit themselves to being clear-eyed. No rose-colored glasses are permitted when deciding what works and what does not.
For the most part, it’s much easier to identify the strengths and weaknesses than to see opportunities and be aware of threats, but the SWOT analysis demands attention to all four elements.
The threats may come from virtually any direction. Most of them will not be new, and because owners have dealt with them in the past, they will be resilient even when confronting them again. Credit is one example.
“We believe the tightening of credit by the federal government will ultimately impact our industry,” says Bruce Tassone, owner of HydraMotion Cleaning Systems in Bridgeport, PA. “The higher cost of credit will affect our product-carrying costs, financing of manufacturing equipment, and structuring of loan or lease programs to contract cleaning firms.”
Mother Nature is another example of a threat difficult to reckon with but always with the potential to stir up trouble. “The recent weather has influenced our planning for 2018,” says Tassone. “Since we source our products in the United States, we have seen impacts to our materials supply. We have adjusted our inventory levels to ensure we will meet all of our customer demands.”
When realizing opportunities, companies must be sure they do so in a way that best matches the expectations of prospective customers. Looking ahead to 2018, Tassone’s firm is continuing its push for exceptional communication via electronic media.
“Our company has been modifying our planning process over the last few years,” explains Tassone. “With increasing levels of ecommerce in the pressure washer industry, we have made a concerted effort to make sure our technical and commercial messages are received. We have had to put additional time and resources into building effective communication platforms.”
In parallel with planning, owners preparing for 2018 also need perspective. Seeing every half-filled glass as half full instead of half empty is a good way to equilibrate in quite challenging circumstances. It applies to business just as surely as it applies to every aspect of life.
Veteran owners know that sales ebb and flow. Those who experienced the deep recession of 2008 and 2009 and kept going despite some tough obstacles had an abundance of perspective as well as a commitment to sustaining their businesses. They recognized things change and economic activity fluctuates.
The year 2018 will mark a decade beyond the severe downturn in the U.S. economy. It’s the 100-year anniversary of both a flu pandemic and the end of World War I; and consequently, it looms large to some.
Yet, 2018 is really just like any other year. Meeting the challenges the year will bring begins with a plan. The plan can be adjusted, if necessary, but just having a plan and being determined to follow it demonstrates the sort of confidence that has carried businesses forward for centuries.
Always have a plan. Have a good plan. And then, modify it if necessary to make it better. Recall one of the rhyming phrases that guided learners of touch-typing for decades: The man with the plan is the man who will win.