Set Input Goals, Not Outcome Goals
In 2020, we plan to do $17M in Gross Sales. In 2020, we plan to dismantle 2,000 vehicles. In 2020, we plan to turn a 14.7% Net Profit. Each of these are Outcome Goals. Outcome Goals are very hard to predict. You should be focusing on Input Goals, not Outcome Goals. What is the difference?
We all know that in-stock sales are directly proportional to vehicle purchases. As a matter of fact, there is a known ratio between the two. For the average recycler, the Cost of Goods for In-Stock Sales is roughly 43%. This number could range from 40% to 50%, but we will use the average of 43% for this example. This is a facility that probably focuses on a 2012-2013 model year for its average year purchased. For this example, we will also assume that this facility is 50% In-Stock Sales, 40% Brokered Sales, and about 10% non-part revenue. So, if this site sets a goal of $17M in Gross Sales for 2020, that would mean that In-Stock sales would need to be $8.5M, which is 50% of the $17M Goal. Stay with me - it’s getting deep. Many of us set Outcome Goals like $8.5M in In-Stock Sales for 2020. However, you should be setting Input Goals instead. For this example, the goal should be to SPEND $3.655M ($8.5M x 43%) on vehicle purchases in 2020. Input Goals are controllable because there are fewer variables associated with them. With an Input Goal, you are not depending on market conditions, customer satisfaction, logistical networks, or salesperson motivation - you are depending on how much money you spend to buy the cars that are needed to reach your goal. You know that Gross Sales are directly proportional to purchases (assuming little duplication of inventory), so set a goal for purchases, not sales.
For this example, the company's goals should be:
1. Spend $3.655M
2. Buy 2,000 Vehicles
3. Average Cost per Vehicle should be $1,827.50 ($3.655M / 2,000)
4. Average QCI score > 70
Did you see that? Every goal is achievable by the buying team. Focus on your buying, not your sales. The buying will cause the sales to increase. I’m also assuming that your data-sharing settings are properly configured. If not, your customer may not know what you have in stock. That’s another entire article, though.
Another Input Goal to set: Number of requests per month. How on earth do you do that? Gain new customers or convince your existing customers to order more frequently. Now you have a target and two known variables that you CAN influence. Let’s tackle the easiest first: Gain New Customers. You can start a new delivery route into a new area or gain new customers on your existing routes. Decide which method you want to use and go for it. Would it be easiest to hire a salesperson that would bring a book of accounts with them? Or, would it be easiest to buy a list of potential customers from Mike French and start with direct mail outs followed by phone calls and face-to-face visits. Either way, DO IT. Set the Input Goal that makes sense for your facility and tackle it. Complacency is the enemy of Growth.
We all know that in-stock sales are directly proportional to vehicle purchases. As a matter of fact, there is a known ratio between the two. For the average recycler, the Cost of Goods for In-Stock Sales is roughly 43%. This number could range from 40% to 50%, but we will use the average of 43% for this example. This is a facility that probably focuses on a 2012-2013 model year for its average year purchased. For this example, we will also assume that this facility is 50% In-Stock Sales, 40% Brokered Sales, and about 10% non-part revenue. So, if this site sets a goal of $17M in Gross Sales for 2020, that would mean that In-Stock sales would need to be $8.5M, which is 50% of the $17M Goal. Stay with me - it’s getting deep. Many of us set Outcome Goals like $8.5M in In-Stock Sales for 2020. However, you should be setting Input Goals instead. For this example, the goal should be to SPEND $3.655M ($8.5M x 43%) on vehicle purchases in 2020. Input Goals are controllable because there are fewer variables associated with them. With an Input Goal, you are not depending on market conditions, customer satisfaction, logistical networks, or salesperson motivation - you are depending on how much money you spend to buy the cars that are needed to reach your goal. You know that Gross Sales are directly proportional to purchases (assuming little duplication of inventory), so set a goal for purchases, not sales.
For this example, the company's goals should be:
1. Spend $3.655M
2. Buy 2,000 Vehicles
3. Average Cost per Vehicle should be $1,827.50 ($3.655M / 2,000)
4. Average QCI score > 70
Did you see that? Every goal is achievable by the buying team. Focus on your buying, not your sales. The buying will cause the sales to increase. I’m also assuming that your data-sharing settings are properly configured. If not, your customer may not know what you have in stock. That’s another entire article, though.
Another Input Goal to set: Number of requests per month. How on earth do you do that? Gain new customers or convince your existing customers to order more frequently. Now you have a target and two known variables that you CAN influence. Let’s tackle the easiest first: Gain New Customers. You can start a new delivery route into a new area or gain new customers on your existing routes. Decide which method you want to use and go for it. Would it be easiest to hire a salesperson that would bring a book of accounts with them? Or, would it be easiest to buy a list of potential customers from Mike French and start with direct mail outs followed by phone calls and face-to-face visits. Either way, DO IT. Set the Input Goal that makes sense for your facility and tackle it. Complacency is the enemy of Growth.
Chad Counselman
Chad@WiseCounselGroup.com
Chad@WiseCounselGroup.com
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