Does it seem at times that you have trouble defining a new service or product on which you want a vendor to give you a bid? (Examples are an advertising campaign, new delivery truck, new phones or phone service, or maybe pallets for the shop.) In addition, after you receive the product or service, ever think that it’s not exactly what you wanted or ordered? Imagine the vendors’ frustration with trying to read your mind when they furnish the bids, and the time lost continuing to clarify the specifications for each vendor.
We learned to use a RFP (Request For Proposal) for any substantial item. In addition to getting more accurate bids and reducing the time to gather bids, the biggest benefit is in defining for your own benefit the description of what it is you want. On a new phone system, for instance, there are a million features and types of systems. What are the minimum features you want in the system? You will be surprised how often you can’t answer these questions internally; so how will a vendor read your mind? How many cordless units will you need? How many lines will be funneled through the system, and how much voice mail capability will be needed? After you have a basic configuration in mind, circulate it to key users in your company, and you will probably get significant comments that will help you refine the request before releasing it to several vendors. ALTERNATIVELY, you may want to release it to just one vendor, as that vendor will then give you lots of information, and you can further refine it before distribution to other vendors. By the way, even if you aren’t going to get competitive bids, the vendor will think you are getting bids and will then sharpen his pencil on the first presentation.
One of 3 things will happen when you prepare the RFP.
1. You won’t be able to define the item and/or reconcile it to your needs and goals.
2. You will define it so well that it is overwhelming, and you will need help or can’t even move ahead.
3. You’ll define it so well that you get good competitive bids, and the specification becomes a tool for reaching your goals.
Vendors are your friends, and you need a good team of vendors just as you need good employees. If you can’t pay them on time, call them. Never avoid them, and always be up front with them. Vendors will help you solve problems with your customers also.
I enjoyed speaking at the 2 seminars In Salt Lake city, at the ARA Convention, and last month at the International Truck Parts Convention in Tucson, it was good to see many of you.
Recycler Story December 2002
Ron, All I Need Is More Money!
I get so many calls from folks who insist that their only problem is that they need more money. Read my lips: If your only problem is that you need more money, then you don’t have any problems. This is true in almost all cases I have seen. Trust me; there is PLENTY of money out there. The banks NEED to loan it. Investors are sitting on the sidelines. (However, that could change in coming months.)
I do believe that you think you need more money. It’s a battle, day after day: trying to buy enough cars, pay bills, etc. Getting more money without solving the fundamental, underlying problems is “Ron’s watermelon story”.
A farmer is bringing in watermelons from Mexico where he gets a great deal at 80 cents each. He sells them for 78 cents but, mysteriously, is always broke. When asked about it, he snaps, “need more volume.”
I have seen it over and over. A recycler gets a new loan, or a line of credit, and then runs it up to limit. Sales spike temporarily and then level back off at previous levels. But now, there is new debt!
The main reason you think the whole problem is money? It’s because your profits have deteriorated. They have been declining for years, but it’s subtle, and we can’t or don’t want to recognize it.
Other underlying reasons (in some semblance of order) are these:
- Too many employees – It’s the number one poison. If you aren’t doing at least $15k/mo per employee, you have too many. Many have a third too many!
- Too many brokered parts, not enough of your own inventory – If you are brokering more than 10% of sales in most cases, the $15k (#1) is out the window.
- Not understanding the true cost of goods, with period correct statements – Also, it’s critical that you project sales at time of purchase. Remember, as my good friend Jim Counts says, “ We don’t buy cars; we buy sales.”
- Lack of pay for performance -Come on, folks; many of your peers started paying their salespersons on commission over a decade ago, paying dismantlers by the car, drivers by the stop, and parts pullers and order fulfillment personnel by their performance.
- Failure to understand how much their current computer system is handicapping them – It’s unfortunate, but you don’t know what you don’t know. Sounds silly, but it is so true. Just minor advances in being able to price your parts, inventory better, buy just a smidgen better, (the list goes on and on) can save or make you thousands, and the cost isn’t $20 per day for a newer system, amortized over 3 years.
- Failure to plan – Very few folks have anything resembling a plan which includes operational and financial goals.
- Failure to get help – There are lots of peers, associations, and folks to help you out there.
I always say there are 4 hurdles to success. Who will get through them first–you or your competition? First, you have to realize that things are tougher. Everyone is getting that one. Second, you have to figure out what is wrong. Third, decide on a plan to improve. Fourth, execute the plan. Sadly, many folks don’t get past the first hurdle. In spite of this, those who are paying attention are doing very well; don’t let anyone tell you that it’s bad everywhere.
Next month: More good stuff from Chapter 3.
Remember, only you can make BUSINESS GREAT!