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By Robert Counts robert@countsbusinessconsulting.com and Chad Counts crcounts@countsbusinessconsulting.com
Winning in Inventory and Employees 1st Dollar – Inventory Always A
nything that is going to survive or grow needs nourishment. Think of
fresh inventory as the food or fuel that allows your company to sustain and to grow. If you decide to spend your money on other things and not on inventory then your sales will be starved for inventory. Inventory must get first priority when spend- ing your precious dollars.
Our data shows that 20% of your in-stock sales come from vehicles pur- chased within the last 30 days. It also shows that when purchasing of inven- tory slows, sales slow almost immediately. This is not only true for in-stock sales, but is also true for brokering.
You Buy Sales, not Vehicles You may have purchased many vehicles
but not enough sales to support your busi- ness. For those that have contracts or who buy vehicles from tow lots, used car deal- erships, vehicles off the street, etc., you may be buying vehicles not necessarily buying sales. Don’t confuse vehicles with sales.
JIT (Just In Time) Replacement Purchase as close to the sale as possi-
ble. If you could buy every part just as you sold it, you would do it. Purchasing consistently maintains the rhythm of the business. It decreases the dollar amount needed to create sales and it maximizes your investment in employees and facil- ities.
Control Cash Flow – Inventory Line of Credit You will have peaks and valleys in your sales and the valleys will leave you short of cash to maintain consistent purchasing unless you have a line of credit. To build and maintain momentum you must have consistent flow of inventory into and out of your business. Without consistent
18 Automotive Recycling | May-June 2015
purchasing you will have months where expenses are greater than sales. Your line of credit helps you maintain that consis- tent purchasing and minimizes the risk of negative profit months, while increasing profits in peak months.
Capitalize Major Expenses Any expense that does not result in
short term sales should be paid over a long period of time. If you want to survive and grow you must correctly manage debt. Anytime you buy anything you cre- ate debt, even if the period of the debt is 30 seconds. From the moment the clerk scans in your purchase until the time you hand them cash there is a period of time in which you have debt. Some debt can create immediate returns – inventory – and some debt can pay back over longer periods of time – crushers and loaders. Amortize long-term debt.
Leverage Employees —Maximize Employee Return on Investment (ROI)
Examine what your ROI is on your employee investment. You should get a
500% return on your investment. You will not survive or grow if the wages/com- missions you pay exceed 20% of your income. Unless you as an owner decide you only want to make a wage or not get paid, you must realize that second only to buying inventory is your return on your employee cost. If you do not control this you will not grow and most likely you will not survive long term.
Reward Success – Manage Failure
Winning is rewarded and losing is examined and corrected. In any sporting event you know when a goal, touchdown, basket or run is scored. You know who did it and it is celebrated. You know who won by looking at the score. Victories are cel- ebrated, and failures are managed. You examine both, but you only celebrate one.
Create a Winning Environment You want your employees to have every
chance to be successful. To take advan- tage of their talents you must understand them and the work they do. Good employees like to be successful. They need to feel good about what they do and to know what it means to be considered a “winner.” You need to create a physical and psychological environment that cre- ates a “winning environment.” Define winning, create a workspace that pro- motes winning and surround winners with other winners.
CBCDashboard and CBC support salvage and recycling business owners to improve and grow through PRP Profit Teams, Inde-
pendent Owners' Groups, On-Site Consulting, and Online Consulting using CBCDashboard: personnel, buying, in- ventory, income, sales activity, operations, and financials. Contact Chad Counts at (512) 963-4626 and Robert Counts at (512) 653-6915. Visit www.cbcdashboard.com and www.countsbusinessconsulting.com.