Sam Allman

Procreactive. Several years ago I trademarked the word. I created it to differentiate the two types of action that I teach in my Time Management and Territory Management seminars. Experience tells me the primary force separating successful from unsuccessful people is action. Successful people act; unsuccessful people don’t. 

Does your job description sound something like this? “Chief Executive Officer, Chief Operations Officer, Chief Marketing Officer, Chief Finance Officer, Chief Human Resources Officer” and (unofficially at least) “chief cook and bottle-washer?” In recent columns, I’ve focused on all of these roles but today I want you to think specifically about your responsibilities as Chief Finance Officer.

The father of business consulting, Peter Drucker, is credited with debunking decades of mistaken ideas while unearthing the true purpose of business. Although that was half a century ago, many flooring retailers have yet to understand and apply it. Drucker concluded: “The purpose of business is to create and keep a customer.” To further explain this, he presents a basic economic situation: a consumer wants or needs a product or service. He has no source for it, or only a source that is too expensive in terms of labor, time, or money. When a consumer locates a business that can fill the demand at a reasonable cost,  that business has “created” a customer.  The consumer doesn’t need to be sold. He will demand the product (or service) from the business.  Bottom-line: By satisfying the consumer’s need, the business has “created a customer” even if the consumer was simply looking for an economic source.

The other day I read a news story about “an elaborate, decade-long scheme to steal more than $4 million from Building 19 stores.” The scam, which started in 1996, allegedly involved fictitious purchase orders and phony invoices for rugs. Authorities say a buyer, a warehouse employee and even a few outside suppliers were in on it. After an in-depth investigation by Massachusetts State Police and the state’s Attorney General’s Office, five people have been indicted. One who has so far pleaded guilty got three years probation, a $5,000 fine and 150 hours of community service. Think about this and ask yourself: Could an employee steal millions from me?

In the June issue of NFT, my colleague Warren Tyler outlined five ways you can increase sales now. His fifth was: “Ask for the order.”  From years of watching salespeople in the floor covering business, Warren and I share one constant frustration: Many (otherwise good) sales pitches fail simply because the salesperson did not ask for the order.

We hear so much talk about retailers embracing technology, Fortune Magazine may have summed it up best: “If you want to outdistance your competitors… you have to embrace technology as powerfully as you can.  Use it as a weapon!”  But what type of technology? There are, after all, two kinds: table-stakes for staying in business, and smart-bets for beating competitors. Fortune’s editors are assuming that every company is equipped with enough basic IT (information technology) to keep it in the game. They are encouraging the smart bets that will help you outdistance competitors. As it stands, basic IT is what you need to survive but it won’t help your company thrive! I hope that is not news to you.

In two previous articles, I described how the primary objectives of flooring dealers actually compete against each other: Sales compete against Profitability, and Short-term Earnings compete against Long-term Earnings.  If you’ve followed me, you’ve calculated your company’s batting averages for these two sets of competing objectives over the past five years, and you’ve identified which set is hurting your company. You’ve finished Steps One and Two and now you’re ready for Step Three.  This is where you learn how you can prevent your objectives from competing against each other. You can start letting them work together. This way, they both improve at once. 

Last month, we looked at an eye-opening study involving 1000 companies. It demonstrated that the four primary objectives most business owners have actually compete against each other. When the study’s authors arranged the four objectives into two pairings, they realized that the first objective, sales growth, competes against the second, profitability. At the same time the third objective, short-term earnings, bumps up against long-term earnings. It’s like a perpetual tug-of-war, progress on one side coming at the other side’s expense.

You and I know that retailing is very complex. We get mired in this complexity when we begin to believe all we have to do is follow a few simple steps. We want better margins, lower costs and increased sales. But successful retailing is far more complex than that. Amidst this complexity, flooring retailers typically share four common goals: to increase (1) sales, (2) profit-margin this year, (3) “economic profit” (earnings) this year, and (4) “economic profit” in the long-run. Nearly all of us manage these common objectives well enough to stay in business, but few of us ever achieve our potential. I believe I’ve found a process you can apply to achieve your potential.

Have you ever SWOTed your company? SWOT is the most powerful technique I know to discover a company’s under-appreciated Strengths and hidden Weaknesses, and to recognize its external Opportunities and Threats. (Hence the term, “SWOT”.)