September 27, 2008

Owning a Glass Shop is Better Than Owning the New York Mets

By Paul Bieber

My dreams have been shattered yet again. There is always next year. There is no joy in Mudville. So what, it is only a game. Anyone who knows me knows that I am a die-hard New York Mets fan. And my boys dropped the ball, again. They had it in their hands, and no one could take it away, if they just held on. They didn’t, I’m upset, and yet, this morning in Fitzwilliam, New Hampshire, the sun did rise.

My boys came in second in the American League East, and second in the National League Wild Card. In baseball, second is just not good enough.

Is it good enough for the glass business? You bet it is. We all set different goals for our businesses. It may be a sales total, or having a certain backlog amount or getting a certain share of the market. You can set any goal you want, but the most basic of all goals, and in the long-run the only one that counts, is achieving an amount of profitability to pay yourself, your investors, and have extra to grow the business.

The American League East has five teams. If you have five competitors, and somehow you knew every one’s profit, and you were in second place, meeting the above goals, I would consider that just about wonderful. I remember watching the Olympics last month, and how disappointed the Silver medalists were. They had worked so hard, and yet were heart-broken not to earn the Gold. To me, they were still second best in the world at their specialty. Not Bad.

A glass shop owner or manager has to set goals and monitor the success of reaching these goals. This is the way to motivate people, to measure yours and their successes and to stop problems when they are small. When you set your goals for all aspects of the business, keep in mind that setting a profit goal is key. Don’t set it to be the best in your area in profit. Set it to be enough to pay yourself a fair salary, earn a return on your investment in equipment and maybe a building, and to have something to grow with. Do this and you will be a champion each and every year. Just don’t bet your profits on my Mets.

How much is enough profit? If you make 10-15% net profit before taxes, give yourself a pat on the back. From 5-10%, it is time to take a good hard look at specific areas in the company. Where are you spending? What is your overhead? How can you bring in more profitable business? Are you paying yourself a nice paycheck, without the profit being there? Speak with your accountant to help pin down where the profit is or isn’t. Maybe you run a really good shop, but you need more sales. Maybe it is in your purchasing. Maybe it is your collections.

If your profit is less than 5% of sales, you really have to consider if this is the best line of work to be in.

My consulting partner, Stan Lane, has told me that he never bought a loaf of bread with a percentage point. So, if your profit is 5%, but that is still a lot of money, than you are OK. But if your overall dollars are that good, then you should find the reasons in your company you are not making a higher percentage.

Check your profit at least once a quarter. Many companies do it monthly. Do you have a bookkeeper? She/He should be able to do this easily. Now, one month does not make a panic, but trends are easy to spot if you look for them. Is labor, as a percentage of sales, increasing? Are materials costs going up, and you are not passing these increases through?

So, second best in profits is great, if it meets your goals.