Looking Out From Within
- Post by: Bill Hood
- August 25, 2021
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As business owners, we often rely on our intuitions to help us make decisions. And while intuitions have some basis in business, we must look a little deeper. In business, it’s quantification – the numbers – that prove (or disapprove) our feelings. Quantification fuels innovation! We need to look out of the box that we have placed ourselves in to actually see the box that we live in, and get beyond it.
by Bill Hood, Senior Researcher, SPTRC
We Only Know What We Know
But there is a problem, you only know what you know – and to successfully quantify those decisions you need to really look long and hard at the things you do know, but also at the things that you don’t know. What you don’t know might be things that you never knew existed. It is only when you uncover those unknowns will you really learn how to quantify your business decisions.
Where Knowledge Come From
As an educator, I am fortunate to help a lot of people, and as it turns out that is also my source of knowledge that has allowed me to grow my businesses and client base. As a consultant in the screenprinting industry for the last 40-years, I have helped over 8,000 shops, a few that had over 1,000 employees. I have had an average of a dozen attendees each month at the School of Screenprinting. Add to that the number of social media interactions, trade show seminars, open house presentations, and through my online support system. I have a tremendous number of interactions with those in the myriad industries in the screenprinting technologies.
You cannot have that many consultations without learning a great amount of information. Every visit revealed problems screenprinters face each and every day. The problems that I encountered were almost never unique, as screenprinters face the same problems as their peers in another neighborhood, city, or country. Yes, two screenprinters separated by an ocean will still be faced with the same ink transfer problem, albeit with slightly different variables.
Every encounter has provided me with an opportunity to learn. Today, the number of unique situations that I encounter has lessened because of the knowledge I have gained from my clients over the decades.
Business and Productivity Management
While I have been kept busy solving production problems relating to screenmaking and ink transfer, the biggest problems have all been related to business management. It seems that far too many screenprinters can get a good enough grasp of the screenprinting process to produce a product, but doing so in an efficient and rewarding manner is not always within their reach.
A few weeks ago, I received a call from a couple in the Midwest of the United States call me with a problem. This is their story.
Bruce and Mary (not their real names) own a textile screenprinting operation. They have been in business for almost 12 years and while they have succeeded in making a living it has been hectic. They have attempted to adapt to the seasons – printing T-shirts in the warmer months and heavier athletic wear in the colder months. And, while some years the business does good, some years they have done so poorly they had considered shutting the business down for lack of business. They have a very good location with lots of drive-by and foot traffic in a downtown storefront. They have a loyal client base, which has helped keep the doors open during the slow period. Saving money from the good months to cover the poor months was disconcerting to the couple.
During one of the slower months, Bruce and Mary noted that their totals from the previous few weeks were beginning to decline – a sure sign of an upcoming financial disaster. They knew it was slow, not only because of the declining revenue, but the size and number of orders were down, as well. They just were not that busy. Bruce and Marry had an intuition that something was wrong, but they had no way of quantifying the ratios and how to make short-term improvements to correct the downturn.
In the past, they had tried to run specials by offering a baker’s dozen, i.e. 13 shirts for the price of 12, thinking that it would pull in more clients. And, although business seemed to pick up, with more clients walking in with orders, they were shocked to find that their Profit and Loss Statement didn’t reflect an increase that was equal to the amount of business the promotion had generated. They worked more hours for less money – not more! Something was terribly wrong.
The next month they tried another marketing approach and by month’s end, the scenario had not improved. They were still working a lot of hours but not seeing an improvement in the financial picture. Bruce and Mary were in shock. During the previous two months, they were exceptionally busy. They met with more clients. They took in more orders. And they even produced more screenprinting, but the bottom line was not getting any better. How could their promotions not work? What was wrong with their business model?
Bruce and Mary called me to discuss what could be done to revive the business and get them on a financially even track. We spoke for a half-hour in which we discussed their concerns and frustrations. At the end of the half-hour, I thought I had a good idea of what had happened to the couple. I explained that they were certainly not alone. Most business owners have been in the same exact spot at some point in their business careers.
Fear of the Unknown
Each month, at the School of Screenprinting a dozen or so attendees come with the same questions. They have the same concerns. Those that have already been screenprinting for a while have frustrations and doubts. A few are in panic mode. But the one thing they all have in common is a fear of the unknown! They only know what they know – and they don’t know what they don’t know! That’s where the trouble begins.
Most people have a vision of their screenprinting business. They know who their client base is, and they know what type of work they want to produce, whether it is a textile screenprinting business with a retail front, servicing the local athletic teams and schools or a warehouse servicing the corporate sector of the community. Some even branch out into Internet sales with their own pre-print lines.
They know how to deal with clients, where to order the substrates, and how to coat a screen, expose it, develop it, and put it into registration on the press. They know how to hold a squeegee and transfer the ink, how to cure the ink, And they know lots more.
But, they don’t know how to run a screenprinting business.
They don’t know how to arrive at the correct margin on ordered substrates, how to figure the labor costs of their employees or the true value of their time invested as business owners. And, they don’t know how to run a promotion that will result not just in short-term goals, but in ways that will continue to generate residuals. They don’t know how to market to an ever-increasing size client base. In short, they don’t know how to do a lot of things! Those things will ultimately lead to a more secure and financially rewarding business venture.
Like so many business owners, Bruce and Mary were using qualitative criteria – what they thought they knew – instead of quantitative criteria. What they didn’t know, they didn’t know! And, most of all, they didn’t know how to quantify their business decisions.
They now know what they must do. They must begin with a simple quantification plan to track and record things, such as desired results, actual costs, and the effectiveness of their business plan. Now, they will be able to measure and monitor an informed outcome and keep things on a more even keel.
Business decisions, if not quantified, might not address the frustration that they were intended to deal with. Or, they might not address the frustration in the most efficient and compelling way possible. That’s where quantification comes in – business decisions, once quantified, can become orchestrated into the operating reality of your business.
Quantification systems allow you to measure the impact of the decisions that you implement in your business. Without quantification – and knowing exactly what it is you want the result to be and knowing, therefore, exactly what it is you will need to measure to tell you if you’ve obtained it — you don’t know if your plan has worked, and you will lack the controls to orchestrate it properly.
Innovation happens far faster and better with some individuals and companies than others. Those that are constantly improving their strategy, performance, and decision-making grow their businesses at the fastest rate. There is no single formula for producing exceptional growth. Because it is different for each business. And, while the best performers on the growth leaderboard change monthly, there are a few who manage to stay at the top. Companies like Netflix, Amazon, and Google did well this past year, but they were already on the list for years before. Let’s discuss some of the things that growth leaders do that are available to anyone.
Lean and Mean Prototype Culture
Have you ever noticed how much trouble people have in sticking with those New Years Resolutions? The reason is simple, making a list on a piece of paper is worthless unless you take action on the list. And, similarly, we grow from our actions, not from the lists that we make. Companies that have excellent growth, are the ones that study every problem that cuts into their growth. The purpose of the study is to allow them to build a useful model—a prototype—that provides relevant information on how to proceed. And, then they take action on the best prototypes that provide opportunities for growth.
Most small businesses live in a “Spreadsheet Culture.” where they endlessly manipulate numbers to come up with financial assumptions in a spreadsheet model. There is no problem with knowing your current financial status. The problem is when you reject the validity of modeling and allow the assumptions of the model to become your ideology. Rather than accepting the spreadsheet model results, true leaders rigorously challenge and test their spreadsheet assumptions. When you have only forgiving assumptions, you will no doubt only have unforgivable results.
Some business owners create blindspots by making assumptions without looking into the future. Take Netflix for example. The movie producers did not see Netflix as a threat. They believed Netflix was only a distributor of their movies. That was until Netflix looked at the revenue that they were producing for the producers and began funding their own movies. The producer’s assumptions created a blindspot that cost them their dominance that proved to be a huge error. By transforming themselves, Netflix was able to produce tremendous growth. Their models allowed them to see in introspect that they could experience growth by altering how they saw themselves. And they took action on the findings.
Why not start building your own models, looking forward and backward, as you do. Were your past assumptions about who you are and what you do correct, and are they still correct? If you are not constantly reinventing yourself, you face stagnation instead of growth. We have to learn to look out from within.