To The Point HOF guest Ken Goodrich is back! Join us as Ken takes us through 7 Centers of Management Attention. In this second part of our multi-episode series, we’ll be looking at Money and Marketing. If you didn’t have a chance to enjoy the first part of this series, be sure to go back and look at our episode on Leadership and Management.
As we’re going through the 7 Centers of Management Attention, it’s important to understand where Ken is coming from. Ken has achieved just about everything one could want in the trades, but it wasn’t some immediate rise to the top. When he was starting, he had the visions of owning his own business, making tons of money, and basically living the life of an MTV rap video. Those dreams got trampled, and Ken had to learn some hard lessons. What he wants to do now is help YOU avoid those road bumps so that you can start off right, or at least correct the course. As Ken says, “if it starts bad, it ends bad”, but the opposite is generally true!
By using the 7 Centers, you can build your business methodically and create fundamental systems instead of just shooting from the hip. These Centers can be scaled as you grow as well. It’s your duty as the leader to look at how you’re operating, and augment your system to get where you want to go.
It’s important to understand that when Ken is talking about money, he means all of the aspects of the financial parts of your business. It’s not just profit or revenue, it’s the systems of money in your business. In the E-Myth book Ken co-authored with Michael E. Gerber, he writes about when he first started in business. Back then, Ken had the wrong perception about money. He was in business to make money, and had visions of making his life like an MTV rap video. Those dreams got trampled, and he had to learn how to have a better relationship with money.
In his early days, Ken abdicated a lot of the money components in his business. He simply hired someone to do the books, and then blindly trusted the bookkeeper to get it all right. That burned him when the bookkeeper didn’t pay the payroll taxes. Ken has made every mistake you can make, and went through a treadmill of hiring bookkeepers and never actually knowing where the books were at.
Ken learned that a business owner needs to have a high fidelity of the numbers and and understanding of where things are at every day. You can’t run a business by looking at your financials weeks or months later. You have to have your financials in order daily to steer the ship. You can’t be an archeologist when it comes to the money! It’s about creating a system of money, and setting up the system to include the accounting and money pieces and parts to flow and provide you with accurate data on a day-to-day basis. It’s also about ensuring that your business has the money it needs to grow, as well as cover all of your legal obligations.
In creating your money system, you’ll be looking at everything that money is needed for to run your business. That includes accounts receivable, how you collect money on delivery, how you purchase things, how you pay your payables, when you pay your payables, payroll, taxes, and more. Ken isn’t suggesting that you need to become an expert and do all of this yourself, of course. You can still bring bring professionals in (and probably should), but as the leader of the organization you have to have a systems mindset. That means understanding the key elements of your business so you can ensure the people handling the systems are doing things the right way.
There are a lot of systems you can buy right off of the shelf, including for finances. If you aren’t sure where to start, locate a system, implement it, and just stick with it. Get your schedule and processes in place, and follow it religiously. Money is a system in your business, just like anything else. The set of processes in this system are what you need to understand. You have to have metrics to run these processes by, and the visibility to make sure it’s happening. In simple terms, you don’t have to understand how to do it all, but what needs to be done and how to make sure it is being done.
Ken understands the struggle of being a small business owner. You are proud of building a business, but you get beat up all day by the job, your employees, and your customers. You put in countless hours of blood, sweat, and tears. It’s only fair that you reward yourself to get your self-worth up, right? Ken cautions against this. He’s been down that road, and knows that it’s a common thing to do. It’s not a good business move.
When he first started out, Ken remembers the feeling of being on top of the world. He found some success, and got a nice car. He tried to live that MTV rap video lifestyle. It was a sobering moment when Ken had to take his new BMW and drive to to the Ford dealership to trade it in for an old F-150 with an AM radio, even paying thousands on top because he was so upside-down on the BMW. Ken had to go back to work because he had dug himself a giant hole. It’s his hope that he can help you avoid this path, and realize early on that money is a tool for your business and for your life. It’s no different than your trucks, tools, technicians, and the phones that ring with new leads. The money your business brings in isn’t “BMW money”, it’s part of a system.
Once you have a cash flow machine, that’s when you can start enjoying the fruits of your labor. First, you have to understand what your working capital needs are, keep it inside the business, and have your money systems in place. Don’t strangle the goose that lays the golden eggs.
Well, how do we generate money in the first place? That brings us to Marketing, the 4th of the Centers of Management Attention. When Ken started, he thought marketing was direct mailing and an ad in the newspaper. Marketing is so much more than that! The concept of marketing is your brand. Who are you and what are you about? What are your brand colors, and why do you have those colors? What do you stand for, and what sets you apart from the competition? Why should anyone choose your business? That’s where you start when it comes to marketing.
It’s the overall “who are we” of the business; it’s your story. Marketing is a part of everything you do including your vehicles, advertising, facilities, uniforms, and your interactions with your customers. You have to hold up your story, and be who you say you are. Marketing is your chance to get creative and express yourself, and it’s how you’re going to establish yourself.
Before you start advertising, you have to create your brand. When your brand connects with your customers in a meaningful way that resonates, you’ll see success. Everything will work better, from your click-through rates and closing rates to your average ticket. When Ken bought Goettl, they were at a 2% click-through rate and after investing in the brand, got it up to 60%.
Branding is a fixed cost of your business just like rent. It’s the difference between a mom-and-pop shop and an enterprise you can build on. With great branding, your customer will know you and your story before you ever interact with them. It’s like they’re old friends, and you can have that foundation of trust right off the bat. It makes resolving issues easier, sales simpler, and conversions less work.
You have to understand that marketing and branding is a static, 12 months a year cost. It’s not like lead generation, which can fluctuate with your needs. It’s an investment, but it will pay off. Just like you have to have a certain amount of cash flow to keep the company running smoothly, you need a certain amount to keep up with your brand and marketing. When things are tough, you can’t look at marketing as something you can do without. How else are the phones going to ring?
So, where do we start with marketing? You have to have the funding. Smart people write up a business plan, raise capital, put it in the business, and put systems in place to run the business the right way. Sometimes that’s not possible, but you have to have the money to have successful marketing. Working capital can come through vendors, lines of credit, and many other places. Spend time on your plan, identify how much money you need to fund the plan, and figure out how you’re going to raise the capital. Then it’s a matter of staying focused on your marketing 24/7, 365 days a year.
When you are working on your business, understand that the business is not you, and it is not your entire life. It’s a machine that you’re building that creates capital to fund the primary aim of your life. Maybe that’s being a missionary or ending world famine, or just being able to provide your family with a comfortable lifestyle. That’s the purpose of your business, to fuel that primary aim of your life. You have to remind yourself that your business is not all that you are, and remove your ego from being intertwined with your business or it can be your downfall.
Ken has been in the HVAC business since he was 10 years old, and working on his business for half of a century. He has everything a man could ever want, and he is convinced that none of it is worth sacrificing your vacations and time with your loved ones. Start your business right so you don’t have the challenges and lost time that Ken had to struggle through. Get your systems in place so the machine (your business) works without you so you can go on vacation and devote your attention to your family or yourself and enjoy time away from the business.
Join us on the next episode on our 4-part series of our 7 Centers of Management Attention when we discuss Lead Generation and Lead Conversion!