Transforming Dormant Leads into Black Friday Gold with Luxury Granite's Strategic Revival!
The Origin Story of North Star Productions:
Running a stone shop is no easy job. Something is always breaking down, people call in sick, customers have unrealistic expectations... Believe me, I've seen it all. In 16 years of running my own stone shop with my wife, we went through the ups and downs. After all that, we still love this business and have a lot to give back, a lot of knowledge to share and hopefully we can help many of our clients avoid some of the landmines that we stepped on along the way!
We started our shop on a shoestring budget in 2007 in the back of my dad’s warehouse. I was 27 and fresh out of university with a degree in Marketing. Our “business plan” was on a napkin, at best and we were sure we could get to $100,000 in sales in our first year. Turns out, our timing was pretty good. When the USA housing crisis hit, our local market exploded! We had the first change in government in 100 years, shifting from the NDP (pretty far left leaning party) to the Saskatchewan Party (central idealism in America but pretty far right leaning at the time by Canadian standards). Our province was suddenly “open for business” with agriculture growing exponentially, tax cuts given to oil companies, and potash (a natural resource) prices at an all time high. Needless to say our business plan of doing $100,000 per year was out the window. We grossed over $250,000 in our first quarter! Real estate jumped by 40% in the first year and we had no ability to keep up with demand. We somehow managed to get the first handful of jobs installed with next to no experience, and away we went! I had a background in flooring distribution and doing tile jobs for cash throughout university. My then business partner was a second year carpenter apprentice, who had some experience doing residential renovation work. We had no idea what we were getting ourselves into, but we were not lacking ambition or work ethic. One way or another, we were going to figure this out!
For the first couple of years, we made it work through pure grit and determination. Living off of the next job we sold with no idea if we were actually making money or not (you can probably guess). I continued working full time in my dad’s distribution business and after work I walked down the street and started cutting slabs in the shop or going to jobsites and helping with installations late into the night. My marriage somehow survived the 100 hour work weeks but by the time my first daughter arrived in September 2009, we were ready to make some changes. We invested in our first bridge saw (a bank repo from the USA housing crash) and started to hire more experienced fabricators from other shops. The problem that we found is there was usually a reason they hadn’t lasted at the other shops! We were doing a decent amount of work and all of our finishing was still by hand. Having guys show up 3 days a week and then call in with a 40oz flu was a common theme. After a couple of years of struggling through that scenario, we invested in our first CNC router, and never looked back. Shortly after this point, my first partner left the business and the second partner joined (more blog posts on business partnerships in the future).
We became much more organized. We implemented software systems, we were able to hire a full front end staff including builder sales, retail sales, a scheduler / office manager, and things were moving along fairly well. We became profitable at about the $2m per year in sales mark and set our sights on bigger things.
Our first attempt to grow to the next level was an epic failure. At first we thought we would just try to get a second install crew and go after a few more builders. There were several problems with this approach. First off, we did not properly forecast how much additional cash it would require to take on the extra account work. Again, we became cash strapped. Payroll ballooned, accounts receivable was the same. Also, we did not account for how long it would take to get the new builders online. Some came immediately and some took much longer so the pipeline was not as consistent as we forecasted.
No problem, we thought. More retail sales will solve this problem! Unfortunately, our second installation crew wasn’t up to the task of the more technical and higher skilled work of retail installations. Builders were so much easier, with basic layouts, no removal, no home owners looking over your shoulder. There was also a much easier sales process with builders, just negotiate the contract and for many of those accounts, you didn't even need to see the home owners. They just sent us the purchase orders and we installed the countertop. More retail work lead to more call backs, more scheduling and administrative work, more second trips for installs, more details to manage in the shop! The shop could not keep up with the footage we were trying to output on the first trip, nevermind the second trip with a remade piece.
Once the pipeline was full of work, and with our installs still fairly disorganized, we made our first attempt to staff a second shift in the shop. It was only logical that simply running a second shift in the shop would lead to double the output… until it didn’t. Most nights I would leave the shop after a 10 or 11 hour day at 5:00 or 6:00 pm only to get a call back from my night shift: we can’t find the piece we need, the program file is not completed correctly, we are missing the sink information on this job that is supposed to be installed tomorrow! Most days, I was driving back to the shop by 7:00 or 7:30 to manage an unproductive night shift. Then when the jobs were finally completed, we didn’t have a good system to stage them, load the trailers in advance for the installs the next day or communicate what didn’t get finished during the night shift.
So, logically more management must be the answer. But we couldn’t find anyone with experience within the industry and prospects with manufacturing experience were used to a much larger operation with a larger team. Our city is small, only 200,000 people or so. This was a manager to manage a crew of 3-4 employees in a shop with only a few pieces of equipment. Hiring someone for what larger companies were paying would eliminate a lot of the profit from the second shift.
We tried some managers from outside the industry. We had no formal training or onboarding process, no documented internal processes or KPIs and no real specific quality control measures. The results spoke for themselves. If we had clear expectations, maybe the person would have had a chance… maybe. But, I doubt it.
So we decided the best answer was to take a big step back. We shrunk back down to one shift, we increased our retail prices to slow down the pipeline, and we eliminated most of the second install crew. We decided to take a hard look at our operations starting from pre-sale all the way to fulfillment and started to document what success should look like every step of the way. Every detail was thought about, discussed and scrutinized and in the end, we ended up with a pretty smooth process.
The second time we grew it was a much smoother process overall. We had documented processes. Sign offs at each stage of the process. Trained management who worked first hand with the existing team prior to going out on their own and the results were much better! We did hire someone who had manufacturing experience and created a compensation package that rewarded successful execution of procedures and KPIs that were met. There were still many bumps along the way, but they were much more manageable. And this time around, I was not back at the shop for the second shift.
The biggest difference in growing successfully the second time around is the design and execution of system based growth within the organization. The use of systems in our sales and marketing programs made the biggest difference in the business initially. Having a consistent pipeline of leads allowed management to implement a sales process that could be quantified and measured at all times. Sales staff are able to see enough opportunities coming in even when the local market was not very busy. This also allowed us to implement strategies in related product categories aside from just countertops and the results were very exciting.
Once we had a stable and predictable sales system that worked all year round, we were able to focus on building HR systems that ensured we could grow and develop our team and also survive turnover. There was always turnover in the entry level positions but when a key person leaves your company and you are not prepared, there is no worse feeling than that! Having key people backed up with documentation and also job descriptions and KPIs made a world of difference!
Each week we are going to write about some aspect of the business that we learned, many will be sales and marketing related and many will be other FAQs from clients or systems that we implemented in our own businesses.
Written by Steve McKenna
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