Bill Gallagher and coach Jeff Gwin discuss a year-long engagement with a UK drive-belt company that grew sales 30% and quadrupled gross profit using Scaling Up tools like FACE and PACE. They rebuilt the management team, improved inventory control, and freed up leadership time for year-two plans targeting 50% organic growth.
Questions this video answers
March 15, 2017
Sales increased by approximately 30%.
Gross profit increased about 4× (four times).
Approximately 50% organic growth planned for year two.
Chapters
Hello and welcome again to the Scaling Up Business Podcast. I'm your host and Gazelle's business coach, Bill Gallagher. So I am just wondering, this show is for you. If you would like to cut your time back, you know, the time you spent and yet still have solid growth, would you like to spend a day, a week less running your business? Would you like to get Your sales up 30%? Still in the process, would you like to get your gross profit up four times where it's at now? That's the story today. We're talking today with a coach from England from the uk, Jeff Gwin from the Midlands area. He's going to be sharing a story of one of his clients and the work that they've done over the last year. I think you'll dig it. I want to tell you just a little bit about Jeff. Jeff, he's a really accomplished CEO. He's had a wide ranging background. We have some similar Air Force background in our respective military. He's got grown families, so he's got a rich background in a mix of technology, software, I think it was. And he's been coaching for many years and he started to apply rock habits more and more to their clients and he's getting some great results. So we're going to talk about one of them today. So welcome to the show, Jeff.
Thanks, Bill. How's it going?
It's going good. So you're back at your home or your office today?
Certainly am. It's Friday evening here, right?
And it's Friday midday here. So welcome to the show and people will be listening at all sorts of different times with us. And we've spent some time and shared a beer or two stateside at the Gazelle's conferences. And I'm glad to have coaches and authors on from around the world. And I think it's great for people to hear that our work is pretty universal, right. That it transcends industries and countries and things like that. So you've got this company that does rubber belts, huh?
Yeah, it's an organization, small, tight company. They import some drive belts from North America. I thought one rubber band was the same as the other. But these rubber bands apparently in North America are a different shape and different size, obviously different sizes, but physically a different shape that fits American machines. So even over here in Europe, if we're driving, if you're using American machines, we need American built belts. These guys import them and distribute them across Europe and they also manufacture a few of their own belts for specialist applications. So it's a really interesting, tight little business, right?
Machines, motors need belts to keep running, right. And they wear out.
If you think of. Especially at the moment. Their niche currently is in small leisure vehicles like snowmobiles, like ATVs, sports area and some small agricultural. But you can expend that much larger. And it's one of the plans that we'll touch on later. But they're looking to get into the industrial side for all of the manufacturing machinery, they're looking to move into refrigeration. The number of belts and applications. I think at the last count there was something like 50,000 different drive belts. And I thought one belt was the same as the other, but clearly it's not.
Just think if a belt goes on your car, you won't be able to put just anyone on there, at least not to go very far very fast, right? I guess so tie an old inner tube on for a moment but not go. So I think we'll all be interested in getting your sales up so significantly while increasing gross profit and cutting the amount of time it takes to manage and lead the business. But let's talk first. Let's step back before we get into how you did that and all of that. What did you encounter? So you've been working with this company a little over a year now?
Yeah, yeah, we're just into. We've gone through a full gazelle cycle. Just starting the second cycle really. Initially when I got to meet Dan, Dan was the founder, the chief exec, the head cheese. And Dan had a number of helpers, like a lot of organisations do. He built himself into a situation where he got a lot of helpers and he got a bookkeeper, a. A lady that did stock control, lots of helpers. But all of the key decisions came back to Dan, came back to the.
Man at the time.
So Dan became the bottleneck. When I first met Dan, he wanted to grow. He put a lot of thought and effort into his organization. So he's quite a planned and well organized individual. But his real challenge was there was no one to help him implement it and he didn't know how to move to that next stage. So it was really interesting. And although initially the conversations with Dan were somewhat I want to do this, I don't know how to do it, I'd like to achieve this. How do I go about Became obvious that the first step in his development was to build out the management team and start to allocate or delegate better delegate more effectively around accountability and responsibility so that others in the business started to carry a load of the work that needs to be done.
Yeah, I think we see this again and again when we come into companies. In the beginning, we have the senior leadership working late and long and we don't necessarily have the whole team or we have the owner, the, the founding entrepreneur busting ass, working late doing things like that. But we don't have the rest of the team necessarily working that way. And it's not for lack of willingness or ability or that kind of thing. There's a whole variety of things of just clarity. Right. And what am I really being, what am I being asked to do? So talk. You mentioned in our preparation for, for the show about using face and pace. So tell us a little bit about how you applied those things and what it's been like.
The first challenge that we looked at was what structure does the business really need and how can we take some of the people in the business and have they got the skills to step up? So we use the original tool, the abc, the talent assessment tool, to look at the people in the business and then to look at the functions within the business to see were there any fits, were there any natural people within the business that with a little bit of love and tender care and nurturing could step up to some of those functions.
Yeah, so pause there for just a second. So first of all, because we're referencing our tools, we should probably let folks know about them and a couple of these tools we can make available for download. So the first one is a really simple thing you just mentioned is talent assessment. Right. The talent assessment tool is a simple two axis grid. We look at the fit to the company or fit to values along the one side and then along the other axis we look at their performance, how well are they performing in their current role and then we divvy that, that grid up into four axes. The people in the upper right that are high performing, high fit to values, high fit to the company culture, those are A players, right? And then our B players, they really fit the values well, but they might not be performing in their role. So they need either the coaching or change in roles in order to be higher performing. Sometimes they're just in the wrong job, sometimes they lack the training they need. And then the people in the others are the C players and the B.C. players who they may be high performing but they're low fit to the company or and unfortunately too many of us have these where they're both low performing and not a particularly good fit to the company. And the kinds of things that we hear there Right. Are. Well, it's better than nothing or I just need somebody or I've got bigger fish to fry. I can't get to this right now. Right. So those are some. Just to create a picture for people of this exodus. And we will put a link to the talent assessment then into the show notes for this show. Okay, continue.
Thank you for interrupting me there because actually there were three people that I'll reference. One lady was a really good fit for the values for the business, a really good individual, but was really being underutilised. So over time, put time and effort into that lady and she's now running the operations side of the business. Another lady who absolutely. We had another lady who had been there a long time, was a really good person, well liked, but was getting towards the end of her working life. We reduced her hours, we gave her additional tasks. So in effect, in the nicest way, she got a reduction in job responsibilities. But she's much happier now and she's contributing and she's now another valuable member of the team.
Yes.
The interesting one is that we had a bookkeeper, someone that was doing just reconciling the books at the end of the week and end of the month.
Yes.
But making lots of mistakes. And she ended up in her assessment in that bottom left hand quadrant that is not overly great at what she does and not really living the dream. And she's left the business really good.
She can go find a place where she can fit in better and where she can.
Right, Absolutely. So from there we then went to the function accountability tool.
Right.
The face tool.
The face tool that we mentioned. The beginning functional accountability chart.
Right. Yeah. A really simple tool, really easy to use, but very, very insightful in that we found that within there, within Dan's organization, we had a real gap in operations and someone controlling what we ordered from, from the suppliers, what actually was shipped, the ability to fill in that role. In terms of operational, we replaced the bookkeeper lady with a management accountant and a trainee. So we're getting much better reporting, much more accurate and timely reporting. All of the things that Dan needs to be able to go to sleep on a Friday evening to know that all of those jobs are done where 12 months ago Dan was doing these sorts of things on a Saturday and Sunday morning over breakfast table, just trying to make sure that everything was done for the following week.
Yeah. Let me come alongside you again. So functional accountability. You can go read this in the book Scaling up and we'll put again a link to this tool as well. In the notes section of the show. But the functional accountability chart says, okay, there's common roles that really need to be addressed in every company. Functional areas that every company needs to think about and address in some fashion. And as you grow, the way you address those will change, of course. But many companies start off without giving a lot of thought to the common kinds of things. So we address the needs that are most obvious and most pressing and, and we have all sorts of different titles. The functional accountability chart is irrespective of titles, but who owns and is accountable for each of the key areas needed commonly in all companies to run. And then you and I as coaches go in and we start to look at the company and start to figure out, okay, which things aren't being addressed or there's no clear accountability. So people work on things and then along the way we expose where the accountability is not clear. People are not sure if it's this person or that person or if it's two people or if nobody's accountable for something. And so that's what you're speaking to here, right?
Absolutely. So having got people focused, clearly focused and accountable, we chose only three sections for year one, Sales and marketing, operations, finance, just focus. It's relatively simple at the moment. Import, export, distribution, business. So we have those three. Then started to look at what outputs did we want from those functions and then start to move those into KPIs and everything else. Now for operations, it's really about controlling the inventory, the levels of stock on the shelves, but also being able to hit the dispatch times. It's all about stock management, stock control and that area of the business.
So in operations I'm looking at the days of inventory available and the availability that lets me know that I'm able to sell or that sales is able to fulfill in orders. And then you're looking at, on the lagging side, the day's delivery or something.
Like that, the performance delivery days from manufacturing. Yes, because when the reality is that when your rubber belt breaks, I've got a piece of machinery that's not moving. So I want it now. It's about now. It's about real now. X stock delivery. So the stock control, stock management is really, really critical. Which brings us on to an interesting story actually.
And yet we know we don't want to have too much inventory. Right. Because then you tie up all your cash.
Absolutely.
Yeah.
We were having real issues with a third party logistics company and talking about the KPIs for operations. Our initial measure, we were looking for 100% same day dispatch. And so that sounded like a really logical and sensible metric until we saw the customer complaints go up. The reason the customer complaints were going up is that the third party logistics company was shipping, but not always shipping 100% of the order. Oh.
So they acted, but they shipped incomplete.
Incomplete. So we have to. So over the 12 months it does take time to get the metrics right.
Yes.
Correct fit for purpose rather than right is probably the correct phrase. So we're now talking about 100% complete shipments. We have to add one word to the metric, but that changed the entire behavior. So the metrics, the KPIs do take a little bit of refining over time, but it was a great metric. And now I'd love to say they're 100%, but they're well into the 98, 99% of everything going out complete on time next day.
So this is another good point to pause and underscore some of the things you're saying. I have deep personal connection to this kind of a metric in operations, both in a company that I was a CEO of and some companies I've worked with, There are times when as a company and even your customers will want you to ship partial or incomplete where it's okay, where it fits that business model. Right. And that's of some advantage to a company because you will get a billing or invoicing or a payment event at that moment. So that improves the cash conversion cycle. However, if you do free shipping on backorders or things like that, you have to look very carefully at the transaction value and the shipping costs as well as the processing costs internally. And you have to carefully consider whether the customer actually wants partial shipments. So partial shipments are a big problem. And the second thing that I can see that I have some personal experience with is we come into companies again, both in a company that I was a CEO of and in a couple clients that I've worked with, where the systems can't tell them what they need to know. So they're trying to manage this on time, complete shipping. And they're having trouble getting a meaningful useful performance stat out of some piece of their, either their ERP software or their chipping fulfillment software. And they're like, geez, we don't know how we're doing. And I was talking with exactly such a distributor company last week and we're talking about things and we realized, yeah, they need to do. Oh, and in fact, two weeks ago with a, a tech company that I work with that has a tech services like A hosting business and they couldn't get what they needed out. I'm like, all right, well then go manual. So in the case of the company that I ran, I had a clipboard in the shipping area and the final person touching the thing compared to the paper on the order with what was actually going out the door. And they could see whether it was complete and what the day shipping was expected so they could log. We knew that shipping was today. Right. And we knew how complete it was or it wasn't going out. If you compared that to the original order, you knew the days later on time it was and if it was short at all or not. And from that you could not only infer how much was being left on the table and how much was flowing to backwards, but you could also create a stat for perfect orders. And sometimes I think we have to. I mean, sometimes companies grapple with this for a while. I remember grappling with and moving it a little bit here and there. And we at that point, 80% of our orders were imperfect in some respect, late or short or whatever. And we looked at that and we looked at that and we looked at that and we worked on it in different ways and we moved it until we popped a couple big issues and then it finally went to 95%, you know, perfect orders. And we knew we had transformed something in the business and the results showed it in that next year. So I think that it's good for people to underscore that sometimes you can't get this so easily from your, from your systems and this applies. I mean, the inventory thing is unique to an inventory based business, but we deal with lots of service businesses too, and they also have operational metrics that sometimes you have to go manual on.
Yeah, I always feel, I know we've had this conversation when I've been over at stateside. We're really automating is you cannot automate a process that doesn't work. So a nice easy process, it's building out. We're now going into an ERP system. Things are going really well. Shipments on time, complete shipments are well into the 98, 99%. So from that perspective, it's in good shape. And the lady that had the ability to do this is doing a really good job at running it. So she's grown into the role. The other, excuse me, just staying with the function accountability. The other area that we had a lot of issues with was really reporting so that Dan could sleep on a Friday evening and getting the reporting correct. So again, we've Implemented Align.
So you're talking about the alignment tool that we use with most clients called Align today. It's a software tool and you can check it out. It's very low cost, easy to implement software tool. Although I do recommend companies step not try to do all aspects of it overnight.
I think it's like a lot of these tools. You use the bits that you want and you grow into them.
Yes. And then there's more and more.
Well, Dan travels a lot with. Although he's the founder, he does a lot of the initial distribution work with signing distribution as an agent.
Yes.
So he's traveling around Europe a lot.
Yes.
So the ability to sit at an airport, sitting a hotel, sit at a cafe and simply check that everyone's living up to their promises and delivering on time, deliver against their goals is an important tool to him.
Yes.
So it works for him.
Now, did you also use PACE with this company, the. The process accountability?
Yeah. Once we got people aligned with functions, we then started to look at the big challenges for the business. And one of the issues really was against all around the inventory. It's all about stock control. So we had these guys, import and export. It's all about stock control.
Yeah.
But we were having the North American manufacturing guys, they were shipping incomplete against orders. So we had short stock, long stock. It was a nightmare. We got the wrong product. So we initiated a process, stock control, stock process that within this, within Dan's organization was controlled through finance.
Yes.
So they could control the value of the stock. They were looking at the high turnover items. Making sure we've got the right stock on the shelves. Yes, it would appear, and we should know anytime in the next 30 days. But we believe that because of the deficiencies we were highlighting, the manufacturer is going to give us extended payment terms on around another million dollars worth of stock.
Oh, good.
So things are going really well. But that process alone allowed us to go and have a different conversation with the manufacturer. You alluded earlier to shipping costs.
Yes.
We were paying two lots of shipping costs when everything would have gone in one box.
Yeah.
And that's part of what's allowed us to. To increase margin.
Because you've tightened those things up and you're not paying additional shipping now.
Yeah, just tightening everything up slowly. That process ran across. We only have really three departments. It involved all three departments.
Well, when you figure out. Right. When you figure out what the key processes are to focus on and when you figure out what each role really needs to produce and what behaviors actions predict successful outcomes in the Key functional areas. Right. Things get a lot simpler. All of our businesses, we have a million different things to manage. And yet if we can prioritize and look at a few things, a few metrics, then we start to have clarity and we start to have that peace of mind. And we don't spend all day focusing on 20 different things. We can get in on the key things that make a difference. So if you're looking at functional areas, process accountability is the next piece. The pace chart that we talked about at the head that we're talking about right now, we'll put a link also to that in and in that one we identify the main processes in a company typically that flow between functional areas. So it could be like from quoting an order to a client to getting the cash in the door. That would be the whole sort of from sales through fulfillment and collection. But anytime something sort of touches more than one person. Right. What are the handoffs? Those are good clues for the key processes within a company. If we identify those purchasing and production and is another one that we often get sometimes there are things in the design, development of products and services that go across functional areas that are key processes and need special attention. They need an owner, they need metrics, things like that.
Correct.
Yeah.
Both those tools do drive clear clarity on what is happening.
Well, that's a pretty good first year with a client, right. The sales up 30%, the manager, the owner sleeping well at night and saving some time to focus on more strategic things. Gross profit up 4x in the business. So now you're going into year two. What's the outlook?
We've got plans for growing at 50% this year organically. We have with the time that we found. Dan, we're now looking at the strategic acquisition that will bring us in a different product set that will allow us to bring a different manufacturer, different product set that we can take into the existing customer base that will bring in. If that comes through as well, we could easily take the business double double in the next 12 months.
That's outstanding. When you do a growth like that, the focus on having the right habits. So a particular focus on the Rockefeller habits are ten practices within the company. The big high level things and as well as the key disciplines of execution make an enormous difference. That's outstanding. I think you should probably also be getting some referrals out of your client there. That sounds like a great first year success story. I love sharing what it looks like on the court in action reality of a real client with a real coach because I think it helps give people a picture of the opportunity of this work. It takes some time and commitment on behalf of the leadership of the company to engage and do our work. There's a cost investment involved that's real too. But these payoffs are very evident and these are pretty typical kinds of things that we get when people really embrace the the work that we do. Of course, if you shrug off everything and don't do anything, don't do any of the work, you don't get these kinds of results. But these are typical kinds of results from what we get. So we're going to put links out to the tools that we mentioned the show, as well as to Jeff's company so you can get in touch with Jeff and ask him more questions. Or if you're anywhere in and around his area of work in the Midlands or in reasonable travel distance in the uk, he's worth a chat with about if he can make a difference for your company. Let me make a mention then of some other things for this. So as always, please go do us a favor and do yourself a favor and subscribe on itunes or wherever you get your podcast. Now we put out a show like this about every week, whether it's with another coach or with a CEO or with an author or subject matter expert in Scaling Up a business. So you'll find a Scaling Up Business on itunes or wherever you get your podcast from. Of course, the video versions of these as well as video tutorials on many of our tools you'll find@YouTube.com Bill Gallagher and of course you can see our blog@scalingupbusiness.com and there's articles and things like that that on these and other topics there. And we have a great growth kit that teaches you and has the overview section from the Scaling up book in there so you can get a good idea of the overall nature of our work as well as an outline for doing your first team sessions and how to do that and all of the worksheets that you need as well. So that's available for free download right at our website scalingusiness.com as always, it's a pleasure to share this with you. Our purpose is helping leaders build a better world and we love reaching the thousands of people we reach with the podcast here. It's a real pleasure. So drop us a line if you have or drop a note in the comments section and tell us how and what you're applying and how you found us and we'd love to hear from you and hear what difference we're making in the world. Thanks again.
We'll see you next time, Sam.
