Before you started this equipment rental business or became the person managing it, you knew exactly what you wanted to accomplish and how to accomplish it. Where has that preparation for success gone? Forecasting, planning, business strategy... call it what you want, but if you are not doing it, your business is not receiving the "intellectual capital" it needs from you, the leader of the enterprise.
Following are some best practices for business planning:
1) Each month in your business, are you creating an 18-month forecast, based upon the last 18 months? Each month gives you a fresh perspective and, while tedious at first, this discipline will buy you tens of thousands of dollars in profit dividends. And remember-anyone can forecast (fantasize) about revenue. A true business person forecasts (and cuts) costs as well.
2) Sit down with your key employees each month and talk about trends they see while looking at these key indicators to your business:
a. What is the dollar utilization of your fleet (total monthly revenue/first cost)?
i. How does this compare to a year ago?
ii. What is the trend for the past six months, and how does the trend compare to a year ago?
b. What are your expenses as a percentage of gross profit?
i. How do these compare and trend?
c. Where are your total maintenance costs in relation to total fleet "first cost"?
i. How do these compare and trend?
3) Last on your list, continuously consider on a monthly basis what your relationship is with the customer on an executive level. You must develop on-going relationships with your "Top 25" customers over any given three-year basis. This is your checkpoint for the business model you have created. Only once you connect on this level will your level of forecasting accuracy begin to grow.
Once you develop and perfect these simple steps, more will come to mind and become evident for the health of your business. Remember this key management principle:
"You can't manage something you don't measure."
Questions or comments? Contact Mike Farley at [email protected].
