The Sign Connection: Superbly Execute the Basic Fundamentals

Earlier this year, I attended the Sign and Graphics Summit (January 26, 27 & 28) and the Global Business Forum at FESPA Americas (February 24 & 25). These meetings were designed for Presidents and CEOs of signage and graphics companies. At both sessions, the attendees discussed the challenges they face in business today: commoditization of many products we sell, overcapacity in the market, pricing pressure, margin pressure, customers ordering shorter runs with shorter lead times, less differentiation, and increased competition (from traditional competitors, new competitors, and new sources, including new media such as mobile marketing). However, at neither meeting were the attendees ready to throw in the towel. At both meetings the attendees understood that these are normal challenges of leading a business in the maturity phase of the business lifecycle, exacerbated by a weak economy. Attendees understood that the key to succeeding in such an environment is to improve their organizations and expand the value they bring to customers and prospects.

As our economy continues on its slow, lethargic recovery, new uncertainties in the world pose threats. The unrest in the Middle East, including the conflict in Libya, has placed increased pressure on the price of petroleum. Depending on the level to which they increase, rising gas prices could put a damper on our economy. The global impacts of the Japanese earthquake and tsunami and resulting nuclear disaster remain unclear. And back at home, we see the beginnings of inflation while our elected officials struggle to deal with our spending and debt problems. These are not the kinds of news stories that give us, as business owners and managers, reasons to feel exuberant about the environment we are doing business in.

The key for us is to commit to running our businesses with a focus on proactive marketing and sales as well as operational excellence. We need to “superbly execute the basic fundamentals”. As I said in my last column, we need to remember the lessons of 2009. We need to continue to focus on the basics of expense control, increasing efficiency and productivity, and managing cash. We need to manage to the Balance Sheet in addition to the Income Statement, strengthening the financial health of our businesses so that when the time is right for us to add new equipment or employees, we will have access to financing and cash.

Business Plans Essential

Every division and business unit of Fortune 1000 companies have a business plan. Too often, as small business owners, we dismiss having a business plan as too “formal” or constricting. The reality, however, is that we need a business plan more than a Fortune 1000 company does: they can afford to make a $25,000 or $50,000 mistake; we can’t. And in today’s environment, it is even more important for us to have a business plan. Our business plan needs to contain, at a minimum, clear objectives of what we want to accomplish, the action plan that outlines the activities to be completed as well as the time frames in which they need to be completed in order to achieve the objectives, and a budget that outlines expected revenues and the expenses associated with the action plan and operating the business. Generally, the business plan will also include an analysis of the company’s current situation and its strengths, weaknesses, opportunities and threats. From there, the most successful and effective business owners refer to their plan regularly and compare their results to their plan.

Monthly Financial Reviews

Another key fundamental we need to superbly execute is to receive and review our financial statements monthly, comparing them to the budget, evaluating key margins and ratios, and looking for ways to improve our company’s performance. In addition to reviewing the income statement, we need to spend time on the balance sheet, as that is the true measure of our company’s financial health. We recommend a minimum current ratio of 2:1 to our franchise partners.

Improving KPIs

A constant eye to improving our businesses’ key performance indicators (KPIs) is critical. Empowering and involving our staff in reducing cost of goods sold, reducing overhead expense, and improving productivity will yield results. Key employees, if not the entire team, will benefit from understanding how to effect and improve these KPIs. Sharing this important business information regularly develops knowledgeable team members that can, over time, begin to think and act with an ownership mentality. In the beginning, when you share such information, be sure to include education to ensure they understand what is being shared. Many employees, in the absence of such education, incorrectly assume profit is a huge percentage of revenue. They have never managed a business and know no better in the absence of such education.

Nuture Relationships

In this time of continued tight credit, developing and nurturing the relationship with our banker is key. Sharing our business plan and results with our banker regularly—not just when we need to borrow money—helps develop the relationship and give him/her an understanding of our business and confidence in us as the owner. In fact, developing such a relationship with more than one banker is a good idea so that you and your business are known when the time comes that you need access to capital. The nation’s lenders continue to face a range of challenges related to increased government oversight and regulation. Regulators are extremely sensitive to public perceptions that the lack of previous policy and enforcement rigor contributed to the financial crisis of 2008. A direct effect of that mindset is contributing the overall current lack of credit access. Many deserving business owners that need credit are unable to get it. Developing the relationship with your banker could result in improved access to funds when you need them to grow your business.

At FASTSIGNS, we work together with our franchise partners in developing their business plan and budget, have developed KPIs for our business, and review their financial statements with them, bringing the value and understanding we gain by reviewing literally hundreds of financial statements. We are about to launch an integrated point-of sale, e-commerce and management information system that we believe will revolutionize our centers and give us and our franchise partners even more insight into their businesses and how to further improve them. If you are interested in evaluating becoming a FASTSIGNS franchise partner, contact us. We are focused on increasing the number of FASTSIGNS locations and are converting select, appropriate existing sign and graphics businesses to our brand.