Retail Observer

RETAILOBSERVER.COM JANUARY 2024 62 G rowth means expansion. Growth means hiring new employees and purchasing more equipment. Growth means more revenue and, let's hope, more profit. Growth is what most business owners are trying to achieve. If growth is your goal, why would you ever want to shrink? When I started working as a technician in 2002, the flow of work was predictable and reliable. It was relatively slow at the beginning of the year, then around the end of June a switch would flip and it would be non-stop till year's end. That pattern continued for the next 18 years until March 2020, when everything changed. After a few weeks of absolutely nothing happening, we got busier than ever. This coincided with our two technicians deciding they didn't want to work in the field during the pandemic. So we were forced to shrink. I went out and did all the calls, every single one, and I lived to tell about it, until we could hire new techs. We were fortunate to find a couple relatively quickly. The involuntary shrinkage was a blessing in disguise, because it forced us to review our systems, strengthen our processes, and rebuild the company in a comprehensive way. As a result, we ended up with a more solid team and infrastructure. Call volume remained enormous through 2021, with no slow-down in the winter, unlike every year in the past. During this time we hired three more techs and two more office staff, then 2021 was our biggest revenue year ever, by a huge margin. It was our first million-dollar year, and we blew past that benchmark. But when the end-of-year financial statements came back, the numbers were disappointing. Profit was about the same as 2019, when we'd had significantly less revenue. This coincided with ASTI 2022 (Annual Service Training Institute), where I attended a class on cash flow management. The presenter happened to describe my exact situation. When small companies approach a million dollars in revenue, they frequently run into cash flow issues and discover that they aren't actually making as much profit as when they had less revenue. I spent some days thinking this over and running through some numbers. I decided that the lowest performers in the company needed to go. We reduced our technical staff by two and our office staff by one, effectively shrinking by half. I dedicated 2022 to improving cash flow management and optimizing efficiency, determined that we would not hire anyone until those were straightened out. Through the year we worked on those things and developed even more robust systems. We ended 2022 with two less technicians but higher revenue and higher profits than 2021. This was all because of intentional shrinkage. In January 2023 we set a theme for the year, as we do every year. This year would be dedicated to growth, but this time it would be intentional growth from a much more solid foundation and a much more robust infrastructure. However, we didn't know what was coming. The beginning of 2023 was a tough time for everyone. Service company owners everywhere were stressed over the enormous slow- down, and it was no different for us. It was very concerning, but we had fortunately worked hard on cash flow management in 2022, and we had put aside enough cash to carry us through the slow time. This year, summer exploded as it had in the past. Although slightly delayed, our growth plan has seen plenty of action – 2023 has turned out to be a good year despite the terrible beginning. We mapped out a comprehensive five-year plan, opened a new service area, and hired additional technicians and office staff, and now we are on track for another record year. None of it would be possible without having shrunk, both voluntarily and involuntarily. Shrinking allowed us to rebuild a stronger and more resilient company that was better positioned to weather the constant changes in the market and the world post-COVID. S E R V I C E D E P A R T M E N T SHRINKING FOR GROWTH David Oliva owns and operates RD Appliance Service, Corp. on Long Island, NY along with his father. They've been in business for over 50 years with a main focus on high-end appliance service, although they do service all brands. David is a member of UASA, MSA and Accomplished Appliance Technicians of America and serves on the board of UASA. RO

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