20 heads are better than one
by Jonathan Mohr, Boating Industry Thursday July 26, 2007
Joe Hoffmaster would have had a hard time cashing the $6,000 check his friend and fellow boat dealer David Briggs faxed him in 1998, but the promise Briggs made – spend the $6,000 it costs to join my 20 Group and, if you don’t make that money back in the first year, I’ll send you the real thing – and the belief that gesture signified, were much more valuable anyway.
Rarely has a fax machine played such a pivotal role in a company’s success or failure. But the pledge made by Briggs, of Wayzata/Minnetonka (Minn.) Marine, and Hoffmaster’s subsequent decision to join the group, have been instrumental in the growth of Hoffmaster’s Marine, the Woodbridge, Va., dealership he owns.
Five years after joining Spader Group 104, Hoffmaster was part of a presentation on 20 Groups at the 2004 MRAA convention where he was able to distribute a handout that showed how the $20,000 he’d spent on membership had helped his business generate $220,000 in gross margin.
“It’s kind of tough to beat that ROI,” says Hoffmaster, now an enthusiastic advocate for the benefits 20 Groups can provide boat dealers. “What I would tell dealers considering joining a 20 Group is that [before joining] I was like a frog in a pot of water and the heat kept getting turned up gradually so that I didn’t notice I was getting boiled to death until it was almost too late. Don’t let that happen to you.”
On the inside
By now most people in the marine industry are familiar with what 20 Groups are and the purpose they serve. Approximately 20 boat dealers, often of a similar size or selling the same brand on a non-competing basis, share their financial information and business experience with one another and, with the help of a facilitator, work together to improve their performance.
But while the concept is understood, the particulars largely are not. Unfortunately, the confidentiality so essential for the full disclosure and frank discussion that allow 20 Groups to work also contributes to the mistrust some have of the process. And there still seems to be a significant gap between those who passionately participate in 20 Groups and the many others who are on the outside warily looking in.
To help try to bridge that gap, David Parker – president of Parker Business Planning Inc., who oversees five marine industry 20 Groups – invited Boating Industry magazine out to Coeur d’Alene, Idaho, this spring to sit in on a meeting of his Cobalt 20 Group (CB01).
For three days, Cobalt dealers from around the country gathered to talk business, share ideas, laugh, eat (a lot) and work together to improve every aspect of their dealerships.
An open book
The openness with which financial information is shared may be the single biggest reason why more dealers don’t take part in 20 Groups.
Clayton Raven, president of Boat Town Inc., based in Austin, Texas, was the first member to join the group, which was founded in 1999. But even he remembers a time when his family was reluctant to buy in because of the necessity of sharing financial information.
“It took me years to join a 20 Group because of that,” Raven says. Once he took the plunge, however, those fears were quickly allayed. “Ten minutes into the first meeting and it was a non-issue. [Joining a 20 Group] is the best thing, in my opinion, any dealer can do. It’s incredible, the amount of knowledge that’s in that one room.”
On the opening morning of the Idaho meeting, it takes about thirty minutes to get to the numbers. The dealers have gathered in a ballroom at the beautiful Coeur d’Alene Golf & Spa Resort, with tables and seats arranged in a large rectangle so that everyone can see and hear one another, and each has been given a copy of a report that details the financial results of every business in the group.
Group members submit their monthly financial numbers to Parker, which he then compiles in a document that compares each company’s results to the others in the group, to the average of the group, to the prior year’s results and to specific expense ratios. Any negative variances show up in red ink, highlighting where the problem areas exist for each dealership.
Those problems are noted and discussed now, with dealers who are doing well in that particular area offering ideas and solutions to those who aren’t.
Parker, who taught Spader 20 Groups for five years and still incorporates what he learned from that experience into the lessons he shares with his groups, says most business owners, when confronted with a financial statement, immediately flip to the back to see the bottom line. They may also look at the sales and gross margin and an expense or two, but quickly get frustrated and move on to something else. As a result, many boat dealers don’t have a precise picture of exactly how their business is performing.
“Our 20 Group report is designed to take the mystery out of a financial statement, because numbers are meaningless unless they are compared to something,” says Parker. “I have benchmarks that will bring dealers to a 10-percent net if they can hit them.”
Another long-time member of the group, Austin Singleton – owner of the Singleton Marine Group based in Dadeville, Ala. – believes some dealers don’t like to be held accountable the way those in a 20 Group are. If the financials show a certain dealership is losing ground while all of the others are gaining it, the group wants to know why, and those questions get asked when members gather.
“When you’re sharing your information it’s like walking into a room naked,” Singleton says. “Some dealers have issues with that.”
Singleton doesn’t. His relationship with Parker and the 20 Group have helped him grow his company from one to seven locations and from $3 million in revenues to $30 million.
“All the growth, all the change, all the discipline, the accountability, everything happened from the day that we met David Parker through Cobalt,” Singleton says. “I attribute 60 percent of our success to David Parker and the 20 Group, and the other 40 to sweat and my employees.”
An unvarnished examination of a company’s financial information is necessary if growth like Singleton’s is going to be achieved. And the numbers don’t lie. They cut out a lot of the “whiskey talk” Parker observes when he attends dealer meetings and hears the participants telling one another how great they’re doing.
“Then later you’ll see them in the reports and it’s just not there,” Parker says. “So [the numbers] cut out all of those smoke and mirrors, and you can get down to the real nitty gritty, the real issues for these businesses.”
CB01 spends more than three hours the first morning going through the financial performance of its member companies and doing exactly that.
The afternoon brings with it the “Executive Session” – a chunk of time set aside for members to ask the group for input on questions they have or problems they’re facing. On this day, the topics span the spectrum from big picture – expansion, territories, management dynamics – to one request for suggestions about the best material to use when constructing a showroom floor. But every item is discussed thoroughly, with 20 to 30 minutes on average devoted to each, as the collective experience of the group is brought to bear on the subject at hand.
The session lasts the rest of the afternoon, and won’t actually be wrapped up until the morning of day three, since day two includes a visit from the sponsoring manufacturer and an offsite visit.
Back in the ballroom at 8 a.m. the next morning, breakfast – complete with an omelet station – is served as Paxson St. Clair, CEO of Cobalt, gives a presentation to update the group on what the company is doing and get its feedback on several new products and other Cobalt-related subjects.
“Say it like it is, you won’t hurt our feelings,” says St. Clair, who is on hand with his father, Pack, and two other company executives.
The Kansas boat manufacturer, which endorsed the 20 Group and asked Parker to run it in the late 90s, now uses it as a dealer council, with Cobalt executives attending two of its three yearly meetings.
“We gather their input as to what they would like to see Cobalt do and what their future needs are,” St. Clair explains.
The dealer council portion of the meeting lasts until midday, and then it’s time for the hosts to take center stage.
Despite its picturesque setting, the Coeur d’Alene Golf & Spa Resort wasn’t chosen to host the meeting because of its amenities. The resort is owned by the Hagadone Corporation, which also owns Hagadone Marine, one of the members of the 20 Group.
One very valuable benefit of belonging to a 20 Group is the opportunity to host a meeting every few years. Members take turns doing so because an important part of each gathering is the site visit, where the entire group spends several hours walking through the host dealer’s facilities, then gives the business a double-barreled review, holding nothing back if problems are found and solutions need to be suggested.
Craig Brosenne, who is Hagadone’s general manager of marine operations, is the man in the hot seat today. He has been working with his employees for three months to prepare for this visit.
“We were going to hone in on everything they were going to look at and try to take it to the next level,” he says later.
After an hour-long bus tour of the dealership’s outlying facilities, the dealers pull up at its main service and sales location and the examination begins. The group breaks into smaller teams, each focusing on one specific function of the business. Working from an 11-page dealership evaluation form and drawing from a pool of experience hundreds of years deep, the dealers talk with the employees and probe the processes.
Then, after nearly an hour of information gathering, the employees are excused and Brosenne, along with Paul Nielsen, the company’s director of sales, takes a seat in front of the assembled group to hear what their peers have to say. (To make sure they truly listen, host dealers are always asked not to speak during the review, unless someone requests clarification of a point or has a question.)
The speakers are respectful but direct. Brosenne and Nielsen hear from a spokesperson that represents each of the examination teams (sales, service, parts, office administration, etc.), and they’re given suggestions ranging from how to modify their sales agreements to what sort of music to play in the showroom.
When the session is over, Brosenne is allowed to respond and thanks the group for its input. “We don’t take this stuff lightly, we’ll attack what we see,” he says. “We’ll take it to heart and get it done.”
When the group gathers to wrap things up on the final morning, it’s time to reinforce what has been learned and make sure the knowledge shared makes the trip home with everyone who attended.
The dealers first hold a “Best Ideas” competition, in which each business throws a little money into a pot ($420 in this case), shares an innovative process or program they’ve been using, then votes on a winner. Hagadone’s diagram of customer touches during the purchasing process takes first place.
The group then finishes the “Executive Session” items from day one, and closes the meeting with the dealers sharing a list of “action items” each intends to implement upon returning home. To help spur those actions, the dealers are told to assign a dollar value to each item on the list – an estimated amount that will be made or saved over the coming 12 months by implementing the idea.
After all of the lists have been read, only two dealers in the room believe they will be saving less than $100,000 if they follow through with their action items.
It costs a few thousand dollars to be a member of a 20 Group, and that’s more than pocket change by most anyone’s measure, especially during lean times. But, as David Briggs knew, and Joe Hoffmaster soon learned, that money is an investment, not an expense.
When the Cobalt 20 Group met for the first time, 10 of the original 12 dealers reported their numbers. David Parker said the average unit sales of those dealers were $5.3 million and their average net was just over $200,000.
Today, eight of those 12 are still in the group. Their average unit sales are $13.3 million and their average net is over $718,000.
“I don’t know how anybody could not be in a 20 Group,” says Austin Singleton, one of those eight. “I really don’t.”
The Four Modes
Several years ago a consultant helped me to better understand and develop my company by using a four-quadrant matrix that describes four attitudes of running a business. I have found this to be so effective that I now use it in all five of my 20 Groups and in personal consulting. It is called The Four Modes of Business. The four modes, or attitudes, of business are: Growth, Trouble, Even-Keeled and Know It All. Here’s an explanation of each:
The Growth Mode of doing business is characterized by the attitude that you never reach the point of knowing it all and that there is always room for improvement. These dealers are always looking for a “better way.” This mode is the only sustainable mode of business and is one that I encourage my clients to always keep in mind. Dealers in this mode are usually the best in their market area. Manufacturers seek out these dealers in each market to represent their products.
It should be noted that growth does not always mean increasing sales volume. It can mean focusing on better ways to run the business in each department, such as how to improve CSI scores, how to increase inventory turns, how to help personnel improve productivity, how to get more out of marketing dollars, how to increase gross margins, how to improve net profit and on and on. The interesting thing is that while Growth Mode dealers are focusing on the other areas of their business, the sales volume often increases as a by-product.
Better employees are naturally drawn to Growth Mode dealers. True professionals want to work for the best of the best.
Looking For Help:
Dealers in the Trouble Mode know they are in trouble and are actively looking for help. Dealers in both the Growth and Trouble Modes are teachable. They take a class and implement what they learn as quickly as possible. They join a 20 Group or seek out professional consultants to help them to keep moving forward or to get out of trouble.
As Michael Gerber puts it in his book “The E-Myth Revisited” these dealers are interested in working “on” their business not just working “in” the business.
“Pride comes before the fall”:
Know-It-All dealers have the attitude that they know it all and you can’t teach them anything. And you know what, they are right. You can’t teach them anything. The interesting thing about this mode of business is that many of the “Know it Alls” are in trouble and do not even know it.
“If it ain’t broke, don’t fix it”:
Dealers in the Even-Keeled Mode of business have “arrived” at a comfortable station in their business. They are, in effect, “coasting.” What they do not understand is that a business cannot coast for very long, as it will eventually coast right into the Trouble Mode.
When these dealers attend a class, they listen but are not likely to change anything about their dealership’s operations.
Business owners that find themselves in the Trouble Mode must be careful, as they guide their companies back to health, to make sure they return to the Growth Mode, instead of drifting into the Even-Keeled, or, worse yet, the Know-it-All Mode?
As a consultant, I have learned that usually the only people looking for guidance or help are those in the Trouble Mode or the Growth Mode. Although there are exceptions, dealers in the other two modes of business are generally not interested in outside help.
Manufacturers can apply the Four Modes Matrix in analyzing their dealer networks. They will be able to mentally place each dealer into one of the four modes. The manufacturer knows that the better dealers will most likely have a Growth Mode mentality.
Every business owner, myself included, has been in and out of all four of these modes at one time or another. It is healthy to have occasional reminders to check our attitudes toward our businesses to determine our place in the matrix. Hopefully, we will manage to stay in the Growth Mode and keep out of the other three.
If you are not already there, you can be one of the “best of the best” by shifting your attitude to the Growth Mode. Are you ready to do it?
The view from inside
“People that aren’t in 20 Groups are normally people who are like Galati Marine that are huge and they’ve got a system, they’ve got it down, or are guys like I was that have six employees and don’t have any time. They look at it and say, ‘It’s a lot of money, and how do I leave my dealership during boat show season?’ There’s a cost to it. You actually have to learn to run your business well enough that you’re not needed, and that takes a while.”
Joe Hoffmaster, owner, Hoffmaster’s Marine, talking about why more marine dealers don’t join 20 Groups.
“Due to working with David Parker for eight years and being in the 20 Group for seven, I would say 90 or 95 percent [of the certification requirements] we were already doing and already had implemented. If we had not been in a 20 Group, it would have been a culture shock trying to do it.”
Clayton Raven, president, Boat Town Inc., on the ease of Marine Industry Certification after belonging to a 20 Group.
“The hard part about doing the numbers part of it is that everybody has to count and do things the same way so that you’re comparing apples to apples – and some dealers, that’s a big change for them, depending on how they do their accounting.”
Austin Singleton, owner, Singleton Marine Group, also speaking about 20 Group participation.
“Making money is only half of a successful business. The other half of having a successful business is having a life to go with it. The business runs well with or without you. That’s when you own your business, your business doesn’t own you, and to me that’s a successful business. That’s what I aspire to for my dealers, not only to have them make a good income, but to have their businesses to where they’re not slaves to them.”
David Parker, president, Parker Business Planning Services, Inc., on why 20 Groups are about more than just numbers.
A manufacturer’s perspective
Several boat manufacturers are onboard with the 20 Group concept. Regal, MasterCraft and Monterey either sponsor or have sponsored groups in the past. Cobalt is also a sponsor, and Sea Ray sponsors three groups.
Sea Ray uses Performance Inc., a third-party company, to facilitate its 20 Groups. Sea Ray President Rick Stone believes the groups benefit his business as much as they benefit his dealers.
“This is just yet another way for us to help ensure our dealers’ success,” Stone says. “I think conceptually it’s a good way for what I would characterize as a small businessman to have the opportunity to sit around a room and look at ideas that are going on at other businesses that are exactly like his, only in a different market.”
In much the same way Cobalt uses the CB01 20 Group as a dealer council, sharing ideas and responding to needs, Stone began participating in a Sea Ray performance group many years ago. And even today, as president, he still attends meetings and uses them to improve the overall business.
“The groups are operating on their own through the motivation of the dealer members,” he explains. “And it continues because the dealers are getting something out of it. That something is they’re more successful and … their success is our success.”
B.I. Book Club 20 Group Twin Pack
One of the things we’ve learned over and over again from the marine industry’s 20 Group members is that they look everywhere for educational opportunities. But they don’t just learn; they apply their studies directly to their businesses.
One resource they’ve been able to take away many ideas from are the business books out on the market. We’ve heard of myriad ideas these businesses have found success with through a number of books they’ve recommended. And at the 20 Group meeting Boating Industry attended, two books, both by the same author, came up in discussion.
“Up Your Business!: 7 Steps to Fix, Build or Stretch Your Organization” proffers an array of ideas on how to improve your business. Author Dave Anderson outlines everything from hiring and managing people to “how to overcome the six temptations of successful organizations.” We read the revised and expanded edition, published in 2007, and found many areas where our company could benefit from applying the concepts it discusses.
The other Anderson book the 20 Group found helpful was called “If You Don’t Make Waves, You’ll Drown: 10 Hard Charging Strategies for Leading in Politically Correct Times” and is currently on our Amazon.com “Wish List.” It’s promoted as a guide to help business leaders stop the trend toward increasing workplace political correctness and teaching them to tackle crises with leadership strategies that get results in times of mediocrity.
The SPADER Model
In the late 1970s, Duane Spader, an RV dealer based in Sioux Falls, S.D., was one of a number of quality dealers faced with the threat of foreclosure. Rising fuel prices and high interest rates had taken their toll on the industry, and in the midst of these tough times, Spader took a step back and began asking some tough questions about decisions that had been made in his business.
He quickly identified a few key principles that could help his struggling dealership, and now, 30 years later, he and his company have developed them into what they call the “Spader Success Model”. The concept, the company says, illustrates the four forces that impact business and captures the essence of all successful businesses. It has become the core of Spader Business Management’s training arm.
The RV dealer created the training and consulting company and 20 Group facilitator, which extends into nine different industries, based on those concepts. One of its most popular programs is the Total Management Workshop, a five-day training course that promises to unlock the secrets of managing a business, from finances to people to planning, and Spader invited Boating Industry magazine to sit in on one of the courses last fall.
While much of the class is a crash course in how to develop and maintain a financial system that works – through a unique perspective Spader developed – there are many other components that teach attendees how to run their businesses better. Using years of the company’s own experience and even more collective experience from its myriad 20 Group members, this class provides a unique look into planning for success and managing people, promising to send attendees away with a clear set of principles, processes and tools to steer their companies in a direction that leads to material new levels of performance and profitability.
“You can either ignore the successes of thousands who have advanced with the knowledge in this program and continue to improvise your way out of the ruts,” the company says, “or you can make a decisive turn for greater success.”
Spader’s problems in the late 70s sound a lot like those dealers are faced with today. That seems to suggest that many dealers could stand to ask themselves some of those same tough questions that Spader once asked himself. Possibly a question like: Is it time I join a 20 Group?