Thursday, December 24, 2009

Wrapping up a Successful 2009

As Christmas rounds the corner and the New Year beckons, I would like to be among many to wish everyone a happy and prosperous New Year.

2009 has been a remarkable year in the home improvement industry. While the press and naysayers will continue to report "newsworthy" items such as job losses we at Dave Yoho Associates tend to focus on the flattening of the downward economic trend and the many companies within our industry that posted their best years ever.

2010 is shaping up to be a monumental year within the industry and we are excited to be a part of it. We look forward to interacting with you next year - and - as always we appreciate your business!

Friday, December 18, 2009

Review from the Summit: Should You Acquire or Be Acquired? (Part 2)

Now I am going to continue to summarize Hobson Hogan's presentation on whether you should consider being acquired or whether you should acquire another company from Day 1 of the Summit. If you have not read part 1 please do so first.

Let's pick it up with your selling/liquidity options:
  • Majority/controlling interest sale: To competitor or investment firm/private buyer
  • Internal sales/transfers to next generation of management: Multi-year S-Corporation/LLC sale programs, management buyouts
  • ESOP (Employee Stock Ownership Plan)
  • Selling significant minority stakes with eventual control sale: Can solve difficult situations where buy-sell agreement undervalues firm, gives owner a ready buyer in cases of illness or death, transaction(s) completed at a discount
Next he discussed the key points to consider before making a corporate acquisition:
  • All starts with strong business plan and big dose of humility
  • Be honest about risks – most are related to executive hubris not quantitative failures of the CFO
  • Plan early and implement slowly
  • Maintain a strong balance sheet
  • Manage assumed liabilities
  • Manage risk as well as return
  • Keep your hand in project selection/pricing
  • Manage personal guarantees
  • Just because you can borrow money does not mean you should
  • Acquisitions should enhance or implement new strategy
  • Acquisitions for acquisition sake will only distract management from its most important activities
  • Acquisitions should support your marketing plan, enhance strengths, mitigate weaknesses, reduce threats
Before you jump into the acquisition plan you need to work on the business plan - and this entails:
  • SWOT analysis
  • Market strategies
  • Product/service strategies
  • Operational plans
  • Management succession plans
  • Financial projections
  • Operating budget
  • Projected earnings
  • Cash flow and CAPEX budget
In the next posting I will finish the summary of Hobson Hogan's presentation.

Wednesday, December 16, 2009

Customer Dis-satisfaction Selling

One of our long-time employees told me a story this afternoon that shocked me - although it probably shouldn't have.

He is a Chinese food fanatic and probably eats it at least three times a week. He is also intensely loyal and when he finds a product or service that he enjoys he sticks with it.

He has been frequenting the same Chinese restaurant for almost 15 years. He loves the food and most importantly the large portions that are incredibly inexpensive.

The other day he went in to get one of their usual lunch specials and the following conversation took place:

Customer: I ordered the lunch special
Employee: Here you go
Customer: (hands employee $7.30)
Employee: The egg roll does not come with the special anymore. $8.30
Customer: Well, you did not inform me of that over the phone. I only have $8.00

At this point the employee reached into the box, took out the egg roll, put it on the counter and proceeded to hand him the box.

Now I must say that if this had happened to me I would have had some choice words for her, but he happens to be more mild mannered than I am. So he simply proceeded to walk out of the restaurant and go down the street to eat elsewhere. He has been eating at the new restaurant for a week now and it turns out that he likes the food there even more than at the original place.

What the employee failed to realize was that she was not in the business of serving food, but serving customers.

Now at this point you might see where I am going with this and are saying to yourself, "That example doesn't apply to my business. They don't teach their employees customer service like I do." My response would be, "Just because you teach them to satisfy your customer base does not mean they are doing it effectively."

Think about how asinine this example is. Let's estimate how much money that our employee spent over the course of the 15 years he frequented this restaurant:

Average price ($7) x No. of Times Eaten per Year: (165) x No. of Years (15) = $17,325

This means that our employee's Customer Lifetime Value was $17,325 and this was thrown away over a measly eggroll!

No matter how strong your hiring practices are and how well trained your employees are, there are always situations similar to this that arise. Ask yourself, do your employees care about your customers? Do they care about your business? And make sure to take precautionary steps to avoid these damaging incidents by involving yourself in every facet of the business.

That was one expensive eggroll!

Review from the Summit: Should You Acquire or Be Acquired?

Day 1 of the Summit continued with Hobson Hogan who is a member of FMI’s investment banking practice. He specializes in building products manufacturers and distributors, as well as other construction industry firms, focusing on mergers and acquisitions, ownership transfer issues and strategy development. He has an extensive background in finance, strategic planning, consulting and engineering. His experience provides him with an understanding of difficult organizational, operational and strategic issues facing the building and construction industry.

Due to the nature of the economy the topic of whether you should acquire another company or be acquired is highly relevant and a summary of what Mr. Hogan covered included:
  • Can your company be sold? If, so do you have competent management and are they a potential buyer?
  • The decision to sell is typically driven by outside forces: Health and/or personal issues, desire to retire, desire to focus on another business or poor financial performance.
  • Everyone is a seller at some point: You may not be alive to see it, but it will happen. The question is where are you in your personal journey – closer to the beginning or end.
  • Evaluate the opportunity to buy: At attractive valuations
  • Acquisitions should fit within overall strategic plan: Is it strategically driven or ego driven? Are you properly capitalized?
  • Strategy should drive acquisitions and your overall personal balance sheet should drive whether you are a seller
  • Investment in your company should be seen as part of personal balance sheet: Are you properly diversified? Is your risk appropriate for your age? Can you live off the proceeds of a sale? Are you truly ready to retire and pursue other interests?
  • Take a rational view of the business as part of your portfolio: Do not ignore the personal impact a sale would have on your finances, lifestyle and standing in the community.
  • Your business is likely one of the more risky investments you have
  • As you move closer to retirement you should ensure that you remove risk from your balance sheet: The unexpected can happen and typically does.
  • Valuations are down significantly: Not likely to return to where they were in the near future. PV of selling in 5 years is $33.7MM or simply put, for the risk of operating your business you would be indifferent between getting $91 MM in 5 years vs. $33.7 MM today.
  • Recovery is likely to be slow
  • Taxes are rising
  • Waiting for a better pricing environment may not yield the results you think: If you sold today and invested in a basket of less risky assets growing at 8%, you have $80.8MM in 5 years – around $10MM less than selling in 5 years, but at a much lower risk threshold.
In the next posting I will review the second part of Mr. Hogan's presentation.

Monday, December 14, 2009

Review from the Summit: Why Most Sales Training Ultimately Fails

Day 1 of the Summit continued as Brian Smith discussed the most common reasons that lead to the failure of sales training within most organizations. These included:
  • Training the wrong person
  • Typical training is not the right type of training
  • No in-place field training or supervision
  • No lead controls in-place
Examine your own sales training and if you are not getting the results that you should be, it is likely a result of one or more of these factors being askew.

Make sure to listen to the free preview of The Successful Science of In-Home Selling, which gives up-to-date methodological steps for dealing with these issues.

The next summary from the Summit will feature Hobson Hogan's presentation on "The Opportunity to Acquire Other Businesses".

Friday, December 11, 2009

Review from the Summit: What's Wrong With Canvassing

My son David took on the next topic at the summit which covered the primary problems that exist when companies attempt to implement a canvassing program. These include:
  • Failure to control the herd: Your canvassers need to be given strict guidelines for their dress, behavior and actions as part of the canvassing team. You expect your salespeople to conform to specific standards, why should your canvassers be any different?
  • Failure to control the process: There is a proven system that produces greater results than anything else that can be implemented. However, just stating that this is how you are going to cavass is not enough. You need to have a strong manager in place who is willing and able to enforce these rules.
  • Failure to measure properly: Your goal should be for your canvass leads to perform equal to your leads from other sources, and maintain a 12% marketing cost.
  • Failure to train: Do you have a canvassing manager? If so, is he devoting enough time to training your personnel to adhere to the guidelines? If not, your sales manager needs to be the one responsible for this task.
  • Failure to coach: Great managers are also great coaches. They see what is working and what isn't and make the necessary changes while constantly motivating their personnel to achieve maximum performance.
  • Failure to compensate properly: Like it or not, your canvassers have to be compensated requisite with their responsibilities - - and canvassing is not an easy job. Remember - your canvassers are an extension of your sales force and should be treated as such.
  • Failure to organize: The successful canvassing program has steps of implementation, you cannot expect to foster immediate results overnight.
For more information on canvassing, look at our free articles.

Next posting, I will review Brian Smith's presentation on "Why Most Sales Training Ultimately Fails".

Tuesday, December 8, 2009

Review from the Summit: Cost vs. Value Report

The next presenter at the Summit was Jim Cory, the editor of Replacement Contractor, a Hanley Wood publication for roofing, siding and window contractors. He currently contributes to both Remodeling and Replacement Contractor magazine as well as their respective web sites and he also organizes the Replacement Contractor Executive Conference, an annual event focusing on sales and marketing in the home improvement industry.

His presentation focused on the Cost vs. Value survey that Remodeling Magazine puts out on an annual basis.

Some of the key points of his presentation included:
  • While the decline is not as sharp as in 2008, the overall trend for home improvement projects is sloping downward
  • On average replacement projects led to a 71.8% recovery in costs, versus 63% for Remodeling and other similar investments
  • Siding (fiber-cement, vinyl) and window replacements (wood, vinyl) contribute 6 of the top ten replacement projects for the year 2009
  • The decline in sunroom value continues to steepen - - at the moment roughly half of the cost is being recovered on average, down almost 25% from 4 years ago
The next topic that I will summarize from the Summit was David Alan Yoho's presentation on the fallacies involved in most Canvassing projects.

Thursday, December 3, 2009

Photos from the Summit

While these pictures should have been posted a long time ago - - its certainly better late than never right?

Our goal for the next program is to have a professional photographer come and take some shots so that the pictures are much clearer. Nevertheless, we hope you can get an idea of how a Dave Yoho Associates program is run if you have never attended one before.

We cannot wait for the next one in the Spring - - stay tuned!

Tuesday, December 1, 2009

Review from the Summit: Lead Safe Work Practices

Continuing on with the summary from the Home Improvement Economic Summit in Indianapolis, Paul Toub reviewed the amended Toxic Substances Control Act (TSCA) and its impact on the remodeling industry.

As Marketing Director of Anthony Home Improvements, Inc. and Housecrafters (installers for 58 of The Home Depot stores), his understanding of TSCA and Lead Safe Work Practices is unmatched within the industry. As a result he was an integral force behind the foundation of Kachina Contractor Solutions, which assists remodelers in conforming to these ever changing laws.

Some of the highlights from his presentation included:
  • The April 2008 amendment to the Act and the impact that it has had on the industry
  • A sample of an old Lead Safe Work Practices pamphlet versus the new one highlighting the differences of what is required
  • Examples of penalties which have occurred over the last year to companies that did not conform to these standards (violations ranging up to $37,500 per day)
  • The types of work that are covered under the act
  • The possible exclusions under the act (which should not be relied upon)
  • A revision to the act which will occur in April of 2010, making the guidelines much more stringent for remodelers. The only exclusions will be for newer construction homes and lead-free certified job-sites. While at the moment there is a provision in place for owners to "opt-out", The Sierra Club is pressuring the EPA to eliminate this option.
  • The EPA-certification process and how to become a certified renovator
The primary take away from this segment was that there is a huge degree of uncertainty in regards to how these laws will be interpreted in 2010 so you should do everything in your power to err on the side of caution.

Keep in mind that you can contact us at (703) 591-2490 with any questions - - and if you have not already ordered it, we are offering the recording from our first summit on our website.