Financial planning is hard. Fullbay’s Jacob Findlay and Robby Gilbert admit that up front. Fullbay’s annual state of the repair industry survey last year indicated more than half of service shops don’t develop annual business plans, and the duo understands why. It’s not easy to build a financial plan from scratch, especially when you’re also running with your hair on fire every day trying to run a small business.
During a session at Wednesday’s Fullbay Diesel Connect conference in Phoenix, the duo told a packed house of shop executives that while building a financial plan might feel like an uphill battle, it’s one worth taking on. Financial planning enables businesses to improve efficiency, better manage expenses, achieve goals and increase profits.
“When you’re building a budget, you should be thinking about ‘What is possible for me?’” says Gilbert, Fullbay vice president of finance. “With incremental improvements, we can exceed what we thought possible.”
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For businesses without a financial plan, the duo says its best to start from scratch. Put together a budget based on your most recent financial information to understand how healthy your operation really is. Gilbert says a budget can be “as granular or high level as you’d like.” Gilbert recommends simplicity for first timers, but says what matters isn’t the number of rows on the spreadsheet, but the accuracy of the numbers within.
“I think the more simple [a budget] is, the more likely you are to use it,” he says.
“Whether a financial plan is super complicated or super simple, you usually come up with the same conclusions,” adds Findlay, Fullbay co-founder and executive chairman.
Findlay advises shops to build their financial plan like a P&L or income statement, with segments for labor, parts, shop supplies, marketing, rent or lease, insurance and more. During Wednesday’s session, Findlay and Gilbert walked attendees through a financial plan template Fullbay has created for customers to use. Gilbert shared how companies can tinker with their financial planning documents to see how adding headcount, improving tech efficiency and inching up margin can boost bottom line profits while also showing how unchecked line item expenses can torpedo an otherwise solid plan. He says tech proficiency is in particular is “the biggest level in your shop that you can pull that will start making a difference immediately.”
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The duo also touched on the importance of financial goals. Once a company has an operational budget, efforts should be taken on a regular and annual basis to drive profitability higher. On this note, Gilbert says SMART (specific, measurable, achievable, relevant and time-bound) goals are the best ones.
“Make no more than three goals annually,” he says. “If you make 10 goals you’ll achieve zero.”
Findlay agrees, stating research indicates companies that set fewer goals are far more likely to achieve their goals with excellence. “You have to say no to stuff. Really understand what you’re trying to do this year,” he says.
The duo also recommends once annual goals are set they should be broken down into smaller goals that can be achieved during the year that will support the larger goal. Findlay says Fullbay likes quarterly goals; 90 days is a good period to keep motivation high toward achieving a goal and serve as debriefs to understand why goals are hit or missed.
“When we didn’t hit a goal — did we overshoot it — or did someone drop the ball?” he asks.
