Three Focus Levels

A very good question that a dealer or manager should ask many times during the day is:

How is this that I am about to do now going to help make sales or improve profit?

Money or Time?
Are we talking about money or time? The answer is obviously "both" or "either." Ask the same question about the money you are about to spend or the time you are getting ready to spend on a project.

You and Your Employees
Not only should you ask this of yourself but before giving an order to an employee consider the same question:

How is what I am about to order my employee going to increase sales or improve profit?

Casually observe each employee and consider whether he is doing something that really counts or is he caught in a trap of just doing "busy work."

Direct Activities
There are three levels of activity to observe when considering what counts most toward increasing sales or improving profit. The first level is action on the selling process. This includes:

  • buying

  • displaying

  • cashiering

  • stocking shelves

  • pricing

  • cleanliness

These are the actions that support direct action. The relationship between support and direct action is obvious but may be different from store to store. Support activities and expenses include:
  • advertising

  • planning

  • client relations

  • purchasing equipment directly related to merchandise

  • employee morale and training

  • profit & loss statements

Secondary support
There are other activities and expenses that are necessary but do not directly affect the sales process. They include:
  • supplies

  • telephone

  • utilities

  • insurance

  • daily sales reports

  • dues and subscriptions

Once you have reviewed these levels in your business, then the following attitudes befome obvious:
  1. Money and time spent on direct sales activity is the highest use of that time and money.

  2. Money and time spent on support is a good use of that time and money but make sure it really is support.

  3. Money and time spent on secondary support is the least desirable.

Efficiency vs Effectiveness
Too often we put too much emphasis on efficiency. Even as a society we act as though efficiency is some sort of work ethic virtue. I have noticed that too often the efficiency about which one boasts is at the secondary support level where the efficiency is usually not very effective.
A familiar example of efficiency vs effectiveness is a store that through careful pricing strategies has the beer gross profit percentage up to 28% instead of the usual 25%. However, sales in this example are $2,000 a month while the inventory is several times too large at $10,000.
Another version of the question above is:

I do what I am about to do very efficiently, but does it affect sales or profitability?

The Burden of Government
I propose two ideas concerning the relationship between government and business:
  1. Local government and business are natural enemies because they seek the same resources.

  2. The economy of the United States is strong because of the people of the United States despite the government.

What I dislike most about government is taxation. Clearly the one universal curse of government is that it causes most business owners to focus on saving tax money instead of going out and producing more income.

Several times a year I will get a phone call about leasing vs buying. The question is, "Which is better for taxes?" Usually a salesman has convinced a prospect that leasing gives one a better tax deduction.

Never make a tax decision over a business decision.

Let's say that buying the vehicle will cost $15,000 over ten years and save $2,500 in taxes. Then let's say that leasing the vehicle over ten years will save $4,000 in taxes. The leasing cost, however, will be $32,000. Then the question becomes: "Would you rather spend $15,000 to save $2,500 or spend $32,000 to save $4,000?" We are so conditioned to think only of the tax consquence that even wording the question as I have, some people still elect to spend $32,000 to save $4,000.

Taxes must be paid. Government does need money to do the things that we expect of government that we cannot do for ourselves individually or collectively. However, make effort to get these things done quickly, effectively, and so that it has the minimum impact on time, energy, and money.

Comply with government, but keep compliance to a minimum.

One of the bad habits of government officials, especially those who design tax, license, and census forms is that they seem to follow a principle: Ask the ten questions that are necessary. Ask an additional five or fifteen in case we overlooked one. A classic example is the IRS EFTPS program. When a business deposits federal withholdings at a bank the old-fashioned way using an FTD coupon, there is only one figure to fill in on the coupon, the amount being paid. This is all the IRS needs to know at this step. However, when the IRS developed the EFTPS program whereby payments are made on-line instead of with a paper check, they added three unnecessary questions. Instead of being satisfied that business X is depositing $y,yyy.yy, the IRS now asks how much is federal withholding, how much is Social Security, and how much is Medicare. Since they do not need this information to process your Form 941, I do not answer these questions in the instructions I write for making EFTPS payments.

The next time you set about filling out a census questionnaire, notice in the instructions that you may take a lot of short-cuts to filling it out. Save time and effort, use them.

A dollar of secondary support saved is like a sale for three dollars
The comments I wrote above may seem as though I suggest you ignore these expenses altogether. I urge not letting secondary support expenses and activities take away from direct sales activities, but secondary support should not be ignored. In fact, doing so can be very expensive. The more you can reduce time and money spent in this area, the more time and money you have to spend in direct sales. When you consider that it takes about $3 in sales to produce $1 gross profit, then reducing an expense by $1 has the same effect as adding $3 in sales. If you are making an effort to control secondary support time and expense, you are actually performing "planning" which is a support activity.

Taking the time to read this article was "planning" activity.