78. Don't Let Your Income Happen To You–Engineer It
Apr 02, 2024
Aaron Walker & Kevin Wallenbeck
"We have tremendous opportunity in the marketplace, but only if we can stay there." How do you manage your margins instead of waiting until the end of the year to go, "Oh, great, we did pretty good!" Income should never be a surprise, margins should always be watched carefully. But HOW do we do this?
Unlock the secrets to transforming your business's bottom line with Frank Abelson, a teacher of intentional profit engineering with over two decades of leading his own IT business. Frank takes center stage to share:
How to maintain margin
What the benefits of margin are besides just $$$
Cultivate a fertile ground for ministry in the marketplace
V= B / C
A unique way to look at your sales funnel to get maximum margin
He'll dive into the talents of your employees and team members, wallet share, and other pieces of the puzzle for you and your business to grow its margin.
Contact Frank Ableson: LinkedIn: https://www.linkedin.com/in/frankableson/ website: https://www.navitend.com/
"We have tremendous opportunity in the marketplace, but only if we can stay there." How do you manage your margins instead of waiting until the end of the year to go, "Oh, great, we did pretty good!" Income should never be a surprise, margins should always be watched carefully. But HOW do we do this?
Unlock the secrets to transforming your business's bottom line with Frank Abelson, a teacher of intentional profit engineering with over two decades of leading his own IT business. Frank takes center stage to share:
How to maintain margin
What the benefits of margin are besides just $$$
Cultivate a fertile ground for ministry in the marketplace
V= B / C
A unique way to look at your sales funnel to get maximum margin
He'll dive into the talents of your employees and team members, wallet share, and other pieces of the puzzle for you and your business to grow its margin.
Contact Frank Ableson: LinkedIn: https://www.linkedin.com/in/frankableson/ website: https://www.navitend.com/
Hey everybody, welcome back to the View From the Top podcast, where we help growth-minded Christian businessmen who desire momentum in their business, their family and their finances get through the valleys and up the mountains to their very own View From the Top. Hey, my name is Wally and I'm glad you're listening today. Aaron is out today so I'm doing it solo, but we received some really great feedback on a recent episode where we featured a TED Talk style presentation by Scott Beebe on profit. If you haven't listened to that a couple episodes ago, go back, check that out. But we thought we'd give you all an opportunity to listen in on another talk from a guy named Frank Abelson. As he dives into. It's really kind of a short again TED Talk style 20 minute, less than 20 minutes talk on income. Don't let it happen to you Engineer it man.
Speaker 1:
Frank and I have some really common beginnings, as we both actually started out in software and then I moved into business over time. So I really appreciate his delivery style and really his no-nonsense attitude, and I think you will as well. As I was listening again to this before we went live with this on the episode, I started thinking to myself how often have I found myself and other business owners that I've talked to, and entrepreneurs just working like a dog hoping that profit will come like doing activity, doing the things and just man, profit's going to show up. Well, what if there was a way to be a bit more intentional about ensuring profit does show up? For us? And that's what Frank is going to share with us today in this episode. I think you're really going to like it and his delivery style and his attitude. As I mentioned before, it's going to be great. So grab a pen, a paper and buckle up as we jump right into Frank's talk. Here we go.
Speaker 2:
So I've been in business for about 22-ish years. At that point you run out of digits to count and a lot of those years have been like one year over and over again, starting to feel like we get some momentum. So when Big A asked about talking, this kind of just came about from things. I'm learning Very much a journey here. So we're going to bookend things with some scripture. We're going to start with Ecclesiastes. What has been will be again. What has been done will be done again. There's nothing new under the sun. Most of you guys are going to say, oh, that was pretty cool. A lot of you guys are going to say, idiot, I've known that for years. This is just me sharing my experience, what I'm learning, so I hope it's beneficial to you. It's certainly beneficial for me to put this together to say, oh, that's what that's all about. A little bit about my journey New Jersey Got a couple Jersey guys here.
Speaker 2:
Right, you like my Jersey accent. So I went to jock high, played basketball, went to a good school because I could play basketball but wasn't particularly good at either of those in the end. So I wound up having to make money writing software and at some point between some jobs and some projects. I realized I was in business and fast forward 20 years. One of those software projects took some private equity investment. So now I'm a CTO of a private equity held company, which, by the way, is not a lot of fun Trying to look for the exit on that personally. But I'm the CEO of an IT business called Navitend. Navitend means to lead and serve. We do outsourced IT, so if it's kind of like boring day-to-day IT stuff, we do that. We do projects. Now it's a lot more security and compliance. And then we do the software, typically for entrepreneurs with an idea for a SaaS where they need to scale something up internally. And I've put our dominant selling idea here predictably awesome IT experiences.
Speaker 2:
This is going to come up a couple of times throughout this presentation. So buckle up. I was told 100 slides for 18 minutes was too many. I don't know that. I agree. So this slide is going to be distributed. So take a picture if you want, but don't stress about taking. Take a picture if you want, but don't stress about taking a lot of notes here.
Speaker 2:
But a couple things I want to talk about is that if we have no margin, we have no ministry. More people go to the marketplace than go to church. We have tremendous opportunity in the marketplace, but only if we can stay there. So making money, making margin, is extremely important so we can have a platform from which to learn and grow. Fight another day. We're going to talk a lot about the idea of throughput here and how to get to the end point without getting distracted by the numbers. All right, so here's a common refrain.
Speaker 2:
A lot of us are technicians who find ourselves in business. We work hard, money comes in, comes out. We pay taxes. We whine about the taxes In New Jersey. We do something else about the taxes, but I won't talk about it here. Rinse and repeat.
Speaker 2:
So a lot of it feels like this You're running really hard, you're swimming really hard, you come up for air. We were talking last night about your AGI and your tax returns Like, well, how did I actually do? And you find that out in like April or October and you find you're just running, running, running. Well, we look at the data and then we have to get back in the pool and we look at some stuff that we have some intuition on, like cash and sales commission. A lot of folks here not so much myself put a lot of energy into social media. I haven't quite figured that out yet. We have a cool logo, but he doesn't talk much.
Speaker 2:
But maybe there's another way to do this and I would submit that we need a model to follow and it might not be a perfect model. I've shared a little bit about our business. Being in IT, we've got a lot of billable hours, so our resources are very much the capacity of our people to do work, and having a model to tie that into has been revolutionary for us. To be fair, I've been looking at some of this data for years and it's just now kind of like oh, that's how that works. So here is our business model. So we're targeting a 30% net operating income off of our gross profit. So gross profit very simply is money in as revenue minus the stuff that you pay for to sell and in our case that looks like computer equipment and software licenses. That's our gross profit and we're targeting a 30%. Noi. That leaves us. We're allocating 50% for staff, 20% for overhead. You guys following at this point? All right, so this is real data here. We're our last 12, 13 months. We're tracking pretty well there.
Speaker 2:
So if you take a step back and you say, okay, I need to keep my staff cost to 50% if I want to maintain that 30% NOI. Well, that means when you feel like hiring somebody, you got to say, well, what are they actually going to contribute? Because if they're not actually bringing revenue in now, my NOI is going down, my staff costs are going up right. So having this model gives a nice filter for things. This is my favorite equation. I'm always writing this down in meetings I go over V equals B divided by C. So value equals benefit divided by cost. We all have some intuition about it, but maybe you don't always put it in those terms. So if you're hiring somebody where your costs go up and they're not giving you really meaningful benefit, what happens to your value? We all have intuition about it, but it's useful when you're looking at a business decision to run it through this equation.
Speaker 2:
And then, when you're thinking about business and equations and last 12 months and key performance indicators, it's useful to not forget what your big idea is, because it can get clinical and sterile when you look at data all the time and you need to remember who you are and what you're about. You need a rallying cry for your team. For us it's this idea of predictably awesome IT experiences, because if you've ever worked in IT, it's rarely predictable and it's seldom awesome. And we try to run everything past this and say, you know, with your staff. Sometimes you go yeah well, this happened. I'll be like stop. For the customer, was that a predictably awesome experience? For the staff member, was that predictably awesome? No, and I have to run that past myself too when I interact and make decisions. So it's important, as you have a business model that can get clinical, to have a big idea, to remember who you are and to guide your decisions.
Speaker 2:
So here's some things around engineering income. So time lost is lost forever. If you think about a hotel here, if they don't sell a room, they can't the next night sell it twice, right? So opportunity costs are all over the place. So idle resources, lazy scheduling, lack of urgency and unplanned work. The worst thing in our world is unplanned work. We've got Paul going out to install some equipment. We get $1,000 to install it. If he has to go back the next day because he forgot a cable, that's unplanned work. We don't get paid. Value equals benefit divided by cost. The benefit was $1,000. Cost just went up because we had to send them out twice, the value to the company went down right. That comes up over and over again and when somebody says, oh, I'll do that tomorrow, tomorrow becomes oh no, that's Monday, that's next week, and you get this ripple effect through the business. So opportunity costs are insidious.
Speaker 2:
So resources? So for us resources are largely people. For you it might be equipment, it might be in hospitality, short-term rentals, it stays right. So try to pick this stuff up and translate it to your own world, beyond just labor. So one of the things that we've done is we've been very intentional about the products that we sell and support. So we try not to support every firewall on the planet. Maybe we might do so a little while when we take somebody on, but over time we try to get all of the equipment that we work with to be the same. So that way the skills that the team needs to have are more narrow. We don't have to hire all unicorns who can do all things for all times. If you've never seen it, check out the movie Moneyball and apply it to your own world. Right? So it's a game changer if you can hire a technician for 50,000 instead of 125,000 because you've got a more narrow set of things that you're trying to support. Be intentional about that. That's been huge for us.
Speaker 2:
And then increasing wallet share for your existing clients is huge. This is bringing more services to those clients, finding ways to do some value add for them. And then Charlie's going to talk a little bit later, I think, about value-based pricing. So if you can get paid more money, that's not just directly tied to hours. That increases your value. So in order to help get from these concepts and put them into practice, we're going to talk about some things you can be measuring in your business.
Speaker 2:
And again, as business owners, we have intuition. For 20 years, I could drive up to my business, see whose car's there and have some innate understanding of what's going on in the business. So we have intuition, but to get it to be organizational, you need some data and bring people along. So the four things we're going to talk about are pipeline, backlog, utilization and realization. Are those new to anybody here? You guys are all like Frank. Go back to New Jersey. This is simple. Okay, all right. So we're going to talk about pipeline first, and I'm going to break this into two swim lanes.
Speaker 2:
We typically think of pipeline as the sales funnel. Get a gajillion guys in on your Facebook page qualify, qualify, qualify. Sell them something. Right For new logos, absolutely. But there's another kind of pipeline, which is those existing clients that you've got, brian, you can go sell them some other stuff, right? So in our world, we've got a number of items that we offer to our clients and on a quarterly basis, we're like hey, curtis, you're doing great. Here's what's going on. In the future, you're gonna definitely have this Kung Fu grip for your business. Smart companies are investing in that now. So we try to work on helping people make prudent decisions along the way. So we've got a pipeline both with new logos and with existing clients. Once somebody says, yes, I want it, they sign the purchase order, they send the deposit check, whatever that looks like. They sign the purchase order, they send the deposit check, whatever that looks like. That opportunity is now in your backlog. You need to own this organization. Somebody needs to come to the office every day and say we've got this backlog people who have committed to us and we're going to go deliver this as quickly and responsibly as we can.
Speaker 2:
And if you can do that well, that is a competitive advantage right, and you can often get a premium dollar for it. And remember, value equals benefit divided by cost. You can get a little bit more benefit. You've got more margin doing the same work, but you can do it in a predictable fashion. Utilization so we've got a 40-hour work week. People don't necessarily have, don't always put 40 hours, we often put in more than that. But when you think about your staff, we're kind of happy if they hit like 80, 85%. So how is that time spent? Billable work, training, pre-sales engineering. Your business might vary. So that's utilization.
Speaker 2:
You look at a resource and say, well, how much actual work are they doing? Realization this other term that we're going to wrap up with here is how much benefit in dollars does that translate to your team? So if I can send Paul out to do that same installation and we get $3,500 for it instead of just getting hourly, our realization goes up. So the way you calculate realization in simple New Jersey math is how many hours times your standard hourly rate and that's kind of your bar, and if you can get above that, that's really where you want to get to. So as you start to measure this data and organizationally you can tie activities and people to it, you can start to really influence how you schedule. If your data suggests that your backlog is light, you can go back into your pipeline and maybe try to pull something through and say hey, brandon, I know we've been talking about that project, I've got some opening on my calendar. I can discount that for you a little bit.
Speaker 2:
There's a whole other discussion whether you should or shouldn't, but by having this data that equips you to forecast where you're going to be in your business and you're engineering and crafting your income, not just saying I got to the end, how did we do? We can actually say, well, we should have this amount. This shows up in our software development world too, where we say, well, you know what? We kind of just do a bunch of backup checks but don't get paid for it. Well, maybe we should be getting paid for that. We're doing pair programming to help provide some resilience for our clients. We can actually get paid for that, so we start to engineer this stuff.
Speaker 2:
So be mindful that when you bring measurement into your organization, it is going to change behavior, always does, so what could go wrong? Try to anticipate what's going to happen there. Our teams will game things, because if there's a scoreboard and a clock. People are going to find a way to game those numbers and remember that we win by delighting customers, not by just saying I'm more efficient in one way or another. Right, and how do all these measurements impact your big idea? So you're going to bring this stuff to your team. How does that help you continue to hit your big idea and what this feels like? I don't play Fortnite or anything that Luke could play. I don't even understand it, but I remember this game. We're all mostly old in here. We remember this game. So we're kind of doing that with our business.
Speaker 2:
We take this pipeline and backlog and realization, utilization, our big idea, the product mix that we have, how we hire and how we train and we deal with the curveballs that come along. It's like, oh, this piece is coming down, it's a great opportunity. Well, how does it fit with the data? How does it fit with our ability to deliver? Predictably awesome. So we're going to wrap up here. Amen, I'm hearing over here. Be sure you know the condition of your flocks. Give careful attention to your herds, for riches do not endure forever and a crown is not secure for all generations. So be thankful in where we are, pay attention. We have to be good stewards and we can't just coast and say, oh, we did great. Keep an eye on our flocks.
Speaker 1:
Wow, was that great, or what? I hope you grabbed a few nuggets to put into action this week, and I just want to publicly say to Frank thank you so much for letting us air this talk and share it with our listeners, as I know they're going to have gotten some really good value out of this. One of the things that really stood out to me more in the beginning of his talk actually, where he's talking about man having more people. Ministry focus in the marketplace is important. There's more people in the marketplace that are in churches actually, and so I found that really interesting and true, and because they're in the marketplace, for us to have appropriate ministry we have to stay in the marketplace.
Speaker 1:
In order to stay in the marketplace, we have to make money, and without margin that's really hard to do, and, of course, having margin allows us to create income and have profit and be able to do those things both for us personally, our families, folks that work for us, our employees, our team members, our customers and those in our community. So, man, I really hope you grabbed a nugget that was one of mine and get to put it into action this week. As we close out today's episode, I just wanna encourage you to join the conversation that we've started here over in the private Christian Businessman's LinkedIn group that we recently launched, and it's just a way for you to connect with other Christian business owners around important topics that we face in our businesses and our families really our spiritual journeys, personal wellness and also our finances. So just go to viewfromthetopcom slash group and we hope to see you there and here on the pod again next week.
