Don’t Run Your Signshop on Autopilot

DID YOU HEAR ABOUT the guy who was killed when his self-driving Tesla crashed? Both he and the car failed to notice the white side of a tractor trailer against a bright, shiny sky.

As many morals as there are to that story, only one is relevant today to our signshops: Don’t operate your business on autopilot. It will be detrimental to your financial health.

Contemporary business owners have many “navigational” tools at our disposal to ensure we don’t hit any guardrails.

On an hourly or daily basis, we have metrics (a fancy word for data) available to let us know if we are traveling in the right direction: How often does our phone ring? How many walk-in customers do we have? How many emailed jobs and quote requests are we getting? How many hits to our website?

On a daily, weekly, monthly, quarterly and yearly basis, we can look at our management software and see how many quotes we’ve entered. How many have we won? How many jobs have we put in? How many jobs have we delivered? What are the dollar values of these quotes and jobs?

This information is at our fingertips and once you’ve run your shop for a while, paying attention to those details can become second nature, like your commute to and from work each day. You’re aware, but not as closely, as if you were driving in an unfamiliar place. If the phone hasn’t rung in a bit, you might think, “Hmm, we are a little slow, maybe I should make some sales calls.” Or, if the emails are coming in fast and furious, you might think, “Wow, we are really busy, I should get some part-time help.” This type of “autopilot” is fine — like breathing, it can quicken or slow in reaction to what’s going on, but it’s always in the background.

However, when it comes to monthly financials, I’m all for kicking it old school, rolling up your sleeves, grabbing your green plastic visor, and geeking out on the numbers.

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Don’t turn all jelly-like at the idea of submerging yourself in your financials. It’s really not that hard.

First, you must have good numbers going in if you hope to make reasonable decisions based upon those numbers. Ever heard of GIGO? You don’t have to have a 100-item balance sheet with a zillion details. I’m talking basics here: Cash, accounts receivable, inventory, equipment and depreciation. Accounts payable, loans payable, taxes payable. And what’s left over: your equity. Your income statement doesn’t have to drill down to minutiae. Sales, variable expenses, fixed expenses and overhead should get the job done.

You need to know that the numbers you are using are accurate, timely and coded properly.

Once your numbers are good, let the fun begin!

Every month end, if you do not already use a specific sign management application, enter your data into whatever accounting software you use (I like QuickBooks), and print out your balance sheet and income statement.

Take some quiet time, maybe before or after the workday, or even on a weekend, and look at the numbers. Get to know them if you’re not familiar with them. Look at the reports by themselves and then compare them to previous months or years. Look at absolute numbers and ratios/percentages.

What do you see? What are you looking for?

Industry associations have published operating ratio studies that are crucial to running a business profitably. These studies outline specifically how to determine what your ratios are and how to compare them to industry averages, “leaders” and “laggards.” Obviously, you want to have your numbers look more like the leaders.

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When steering your company in this manner, you are following the road signs to profitability, letting the leaders guide your way. Is your SPE (sales per employee, probably your most important ratio) lower than the leaders? It’s pretty simple to correct that. Either increase the numerator (sales) while keeping the denominator (employees) constant or keep the numerator (sales) constant and reduce the denominator (employees). What does this mean in English? Get more sales with the same number of employees or fire some employees but keep the same sales. Don’t ask me how to do it…that’s your problem!

Does your cash look low, but receivables are high? Get on the phone and make some collection calls. Is your overhead growing faster than your sales? Look at cutting some fat.

Think of your monthly financial statements like your report card. Review them with the same fervor and excitement as when you were a kid opening that envelope, awaiting the smell of the carboned paper (or maybe that was just me)!

If you are already engaged in this activity, you get a gold star. Well done and keep up the good work!

If you’re not doing this and don’t know how to start, either ask your accountant or go to one of our many industry resources at printowners.org. Once you have a good balance sheet and income statement, looking similar to those in the ratio studies, you are off to the races! You’re smart, you’re a business owner, you got this!

The key is to get started right away. The end of the year is one of the best times to get going, but don’t worry about when you start. Just take a look at what you need to do to get your numbers in good working order. That’s the first step. After that, just spend an hour a month reviewing your financials, looking at your ratios and getting yourself on the right path.

This is what I mean about steering your company: making those seemingly small adjustments and financial modifications that can bring you closer to the profitability you desire. It’s been said many times before, if you don’t know where you are going, how will you know when you’ve arrived?

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