Business Tip – November 2013

mapei_sponsorFinancial Operations: overhead analysis, accounts receivable and payable and invoicing

In this issue of TileLetter, we continue with the Financial Operations section of the NTCA Business Reference Manual, as found on page 31 in that document. Last month we examined common accounting terms and the labor burden rate. This month, we review overhead analysis, accounts receivable and payable and invoicing. Check upcoming TileLetter issues for more tips and recommendations on running your business efficiently and profitably. To download the entire NTCA Business Reference Manual, visit www.tile-assn.com.

c. Overhead analysis
An overhead expense chart will show items like advertising, sales, office expenses, staff, rent, office equipment, telephone, computer, office supplies, job expenses, vehicles, job supervision, tools and equipment, service and warranty, mobile phone, general expenses, owner’s salary, general insurance, interest, taxes, bad debts, licenses and fees, legal fees, education and training, entertainment, association fees. Make sure all these overhead costs are factored into your job estimates.

d. Accounts receivable and payable
Accounts payable are people or companies  you do business with and whom you need to make payments to. Accounts receivable are people from whom you will be receiving money. Set up a system to track payments due to your vendors and subcontractors, as well as weekly accounts receivable reports so your customer accounts don’t get too far in arrears.

e. Invoicing
Typically, residential jobs are billed upon completion, with a “draw” requested to cover the cost of any materials purchased up front.

Commercial jobs are usually billed in stages. For large jobs, you may need to bill a “materials draw” to cover the cash outlay for materials to be used on the job. Commercial jobs are generally paid more slowly (45-60 days), so you need to plan your expenses accordingly. Most commercial contractors will hold a portion of your payment as retainage and require you to submit notarized applications for payment. Each contractor has specific forms for you to complete, and you need to make sure you read them thoroughly.

Many contracts state that you won’t get paid unless the contractor does (pay-if-paid), but this is not legal in some states. Know the laws of your state, and don’t be afraid to edit a contract accordingly.

You should put a payment schedule in your contract to control when you will be paid and the amount. This is new to GCs but if you will start implementing this, it will help your cash flow to know exactly when you will be paid. Poor payment schedules on contracts cause cash flow problems. They should be well defined and followed. If you are unsure, contact your attorney for the proper wording and implementation.

Business Tip – October 2013

mapei_sponsorFinancial Operations: running your tile business the right way

In this issue of TileLetter, we move to the Financial Operations section of the NTCA Business Reference Manual, as found on page 31 in that document. Part A familiarizes you with common accounting terms related to your business, and part B explains the labor burden rate. Check upcoming TileLetter issues for more tips and recommendations on running your business efficiently and profitably. To download the entire NTCA Business Reference Manual, visit www.tile-assn.com.

Financial operations

The relationship with an accountant is vital to running your business smoothly and profitably. Your accountant can advise you on the complexities of federal and state taxes and benefit you with good and proper record keeping. Your accountant can help you decide what type of business classification is best for you, and can be a valuable resource for future decision making.

a. Common accounting terms

BOOKKEEPING – the recording of monetary transactions related to your business.

ACCOUNTING – the financial structure of a company. An accountant helps design financial systems, conduct audits, develop forecasts, prepare tax reports, and analyze and interpret financial data for business decisions. Your accounting should be set up on cost accounting, not tax accounting. Tile contracting is a cost-based business.

CHART OF ACCOUNTS – When you set up your accounting program, the chart of accounts shows a specific numbered category which will be associated with each expense and type of income. A basic bookkeeping program will have a sample chart of accounts, or your accounting professional will have an outline for you to use. Setting up the Chart of Accounts correctly will make all your accounting work run more smoothly.

INCOME STATEMENT – Also referred to as the Profit and Loss statement, the Income Statement indicates how a company’s sales and expenses tally for a specific period of time. The difference between revenue (goods and services sold) and expenses (cost of goods and services provided) for a particular time is net income.

BALANCE SHEET – a “snapshot of a company’s financial condition” – a balance sheet shows assets (what you own), liabilities (what you owe), and ownership equity. The net worth of your business equals assets minus liabilities.

CASH FLOW STATEMENT – The flow of cash into and out of the business is reflected in its cash flow statement. This report is useful in determining the short-term viability of a company, particularly its ability to pay bills. It is useful to managers, accountants, potential lenders and investors, as well as the business owners.

PROFIT AND LOSS (P&L) STATEMENT – A regularly-produced report that shows the overall financial health of an organization by documenting income versus expenses. A well set-up P& L allows you to make good daily business decisions. Note: make sure depreciation is not included in this statement. First, you cannot use it; second, you cannot spend it, and if it is under expenses it pushes up your markup.

b. Labor burden rate 

“Burden rate is the total indirect cost, calculated as a percentage of the construction company’s direct labor. In other words, for every dollar of direct labor allocated to a contract, burden is applied as a percentage of the direct labor. But before a contractor can accurately calculate burden rate, all contract costs assumed by the company must be fully accounted for and factored into the final burden rate equation.

“Contract costs are broken into two classifications-direct and indirect. Examples of direct costs include direct labor, materials and supplies, equipment rentals, etc. These costs are obvious inclusions for estimators preparing bids for a potential contract. What may not be as obvious are the indirect contract costs.

“Indirect contract costs that should be part of the final burden rate calculation include:

  • Workers’ compensation
  • General liability and automobile insurances
  • Vehicle and equipment repairs and maintenance
  • Depreciation
  • Field communications expenses
  • Employee benefits such as health, life, disability
  • Payroll taxes

“All costs associated with paying employees, including FICA, unemployment and Social Security, should be calculated as part of labor, as should vacation time, holidays, sick days, warehouse personnel, training, safety, hand tools, and clothing.

“Variable overhead should also be factored into the overall mix. This category includes all costs directly related to employees that cannot be divided accurately between jobs, such as fuel and cell phones.

“All too often, these overhead expenses are overlooked by contractors and therefore not included when calculating a project’s burden rate. Depending on the benefit package involved, employee-related costs will typically account for 24% to 33% for a non-union contractor. For a union contractor, the burden rate for employee-related costs will range from 60% to 70%.”

– From www.constructionbusinessowner.com.

Business Tip – September 2013

mapei_sponsorNeed business support and advice?

Join NTCA – it’s what wise contractors do. 

One of the great values of being a member in NTCA is the trusted camaraderie that exists between members. Need some help? Your fellow members – located throughout the country – are willing to lend a hand and answer a question.

Last month, one of our State Directors, Isaac Homza (Hawaii) reached out via email to his fellow directors for some guidance and advice in finding quality help. His question — and answers from other members, directors and NTCA staff — gave Homza some direction and may be helpful to you, dear reader, as well.

Subject: Re: Tips on finding Quality Help?

Aloha Regional and State Directors,

Hope everyone is doing well.

Looking for advice on the best way to find quality help.

We are a small company: myself, another setter and a helper/apprentice.

Both my guys are great but my helper just had an opportunity come up in another line of work.

I prefer a young person that has the potential to learn the trade. We are based on Maui, where there are plenty of distractions and at times a relaxed attitude towards work.

What sources have you used to find quality applicants and how do you handle the interview/application process to find the best?

Isaac Homza, Higher Standard Tile, Maui, Hawaii

Within hours, Homza had responses from several fellow directors:

Isaac,

We are a smaller company and don’t play in the big arena. I have had my key employees for over 10 years and one from almost the start. I pay them well, give them vacations, and make sure they are trained well and attend seminars on my dime.

I believe their confidence to do challenging installations has improved ten-fold since being CTEF Certified Installers. They are the backbone of my business. We have hired their family members and friends; some have worked out and some have not. We weed them out quickly.

We don’t want every job – just the rewarding ones, both financially and aesthetically. I would encourage you to pick out your key guy – paid accordingly – who is involved with choosing his workforce and fellow laborers. This will leave you more freedom to focus on your business.

I worked in Maui many years ago, so I fully understand the challenges you face with a transient workforce – and when surf’s up, no one shows.

Good luck, and make sure they attend the NTCA Workshops.

Martin Brookes, Heritage Marble & Tile Inc., Mill Valley, Calif. 

I will sometimes stop at construction sites when it is evident that tile work is going on. I have found several good tile setters that just do not like running a business.

This keeps my training investment down and lessens the risk of training my competition.

Scott Heron, Precision Tile, West Columbia, S.C.

I actually had some luck by paying attention at fast food restaurants that I frequented. I watched to see who was a hard worker and had a good attitude (this sometimes took a little time) and would ask if they might be interested in a different line of work with a future, and gave them a card to call me. This also worked in a grocery store for me once, though that is a better job than restaurant work.

Michael Whistler, NTCA trainer/presenter

Business Tip – August 2013

SponsoredbyMAPEIRevisions to retainage laws welcomed by tile contractors

By Bart Bettiga, NTCA and Greg Preves, Curran Group Inc.

 

All tile contractors have undoubtedly encountered a “retainage” clause in contracts for both private and public projects. This clause allows the project’s owner or general contractor (GC) to withhold a certain percentage of each progress payment until satisfactory completion of the entire project. Owners and GCs argue that retainage is necessary to assure completion of the project in a timely and workmanlike manner.

The most common retainage provision allows the owner or GC to withhold 10% from every progress payment made to the contractor. The sums retained are then released as part of the final payment made after the entire project has been completed and accepted by the owner. Occasionally, the contract provides for the reduction or elimination of retention after completion of a certain percentage of the work.

Tile contractors should carefully consider the impact of retainage provisions. At the very least, retention means that the contractor will have to complete all work before the release of withheld payments.  As a result, contractors may have to pay vendors for tile and installation materials long before all of the necessary funds to pay for such materials are released.  Additionally, where the release of final payment is contingent upon the owner’s acceptance of the entire project, retainage will be held until all contractors have satisfactorily completed their work.   This means that final payment could be held for long periods of time due to third-party performance issues over which the tile contractor has no control.

In an environment of dwindling profit margins, retainage often exceeds the amount of the contractor’s profit. Not only does this situation present liquidity challenges, but extends the contractor’s exposure to the risk of owner or GC insolvency. Tile contractors are also vulnerable to unscrupulous owners and GCs who may purposely delay payment to assist in financing the job or as leverage to resolve work issues or claims.

Although retainage is a contractual issue, tile contractors should be aware that many states have begun to impose limits on contractual retention requirements.  Thanks to hard work by groups like the American Subcontractors Association (www.asaonline.com) and the Associated General Contractors of America (www.agc.org), such legislation continues to move forward. Tennessee has enacted a law limiting retention in both private and public projects to 5% of the contract amount. The law requires that retention funds be released within 90 days of the contractor’s completion of the work. In North Carolina, new legislation limits retention to 5% on public projects over $100,000, and prohibits further retention after 50% of the project reaches “satisfactory” completion. In total, 40 states have enacted laws specifying a maximum retainage percentage for public and private work.

Some states have gone further to limit retention rights. In lieu of retainage, 21 states allow contractors on public projects to post security such as a bond, certificate of deposit, or letter of credit. Mississippi, Oregon, and Tennessee offer a similar alternative on private jobs. Meanwhile, some states require that retainage held on certain projects be placed in interest-bearing escrow accounts, such as California, Kansas, Ohio, Oregon, Tennessee, Virginia, and Washington for public projects and Connecticut and Ohio for private projects.

Many states have enacted prompt payment requirements that provide for substantial monetary and criminal penalties. New Mexico imposes the most restrictive limits, requiring that retainage funds be released separately as each individual scope of work item of the project is completed.

If you are a tile contractor who works on commercial projects, you should be aware of the retention obligations at the time of the bid, and negotiate these terms with the owner or GC prior to signing a contract.  If you are uncomfortable with the requirements, consider requesting a reduced retainage percentage or a specific deadline for retention release.

You also need to be aware of the retainage laws in the state where the project is located. Several contractor association websites provide summaries of the retention laws in all 50 states. Visit these resources for more information:

• American Subcontractor’s Association: http://www.keglerbrown.com/File%20Library/Unassigned/2008-asa-retainage-summary-publication.pdf

• This 2004 paper from the American Subcontractor’s Association is a bit older, but gives an excellent in-depth discussion of the topic and discusses the approaches of many different states: https://www.asaonline.com/eweb/upload/Retainage%20Report%20for%20CKD.pdf

• This survey was produced by the law firm of Holland & Knight: http://www.hklaw.com/files Uploads/Documents/Alerts/Construction/01-20-12.pdf

To the extent contractual retainage requirements violate state law, they are unenforceable and should be removed from the contract. The goal is to draft a retention provision that fairly balances the owner or GC’s need for timely project completion with the tile contractor’s need for timely payment. A little time spent addressing this issue at the beginning of the project may save a major problem down the road.

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Greg Preves is a staff attorney for Curran Group, Inc., parent company of Crossville, Inc. Founded in 1986, Crossville, Inc. is a U.S.-owned and operated manufacturer of award-winning porcelain stone tile collections for residential and contract applications.

Business Tip – September 2012

Delivering customer service

By Steve Rausch, USG Corporation

“Do what you do so well that they will want to see it again and bring their friends.” – Walt Disney

In my humble opinion, the quickest way to make or break your company is via your customer service system or lack thereof. One of the big problems of customer service is the definition of what customer service is! It’s so difficult because it is such a moving target. Once you discover what customer service means to your company, you quickly find that (a) it needs improvement, (b) your competitors have exceeded or redefined the limits required, or (c) you just continue on doing what you have been and discover you are losing market share rapidly and don’t know or understand why.

Customer service has been and continues to be the number one driver of growth at most major successful companies. Think about Amazon, BMW, FedEx, Ritz Carlton, UPS and Zappos – all are widely-known and respected for their customer service.

One story, told by Zappos CEO Tony Hsieh, is about a phone call to their 24-hour customer satisfaction center (customer service via phone center) asking where to get a pizza delivered late at night. Now Zappos isn’t in the pizza business, they’re best known for shoes, yet their rep took the initiative to go online and find the closest pizza place to the customer’s location and gave the caller the phone number. No sales transaction took place that night for Zappos; however, that is one customer who won’t go anywhere else for their shoes when they do want/need them.

And Ritz Carlton Hotels keep a list of returning customers’ likes and desires so they can have the room just right. For example, I use a CPAP machine at night and discovered my room at the Ritz had no outlet by the bed for my machine. After calling down to the desk they sent up a person with an extension cord with multiple outlets for my machine. Pretty standard for a hotel – BUT WAIT, the next visit, and every visit since, my room always has that same setup so that I don’t have to call and request it ever again! Now, can you imagine that I use Ritz Carlton whenever possible?  You bet I do!

What can YOU do in your business to take your customer service above and beyond the expectations of your customers? What needs can you anticipate and have already handled when your customers do business with you? The bottom line here is determining what UNEXPECTED PLEASURE you can provide to your customers so they provide you with a better bottom line. In the words of Jim Rohn, “One customer well taken care of could be more valuable than $10,000 worth of advertising.”

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Steve Rausch represents the Substrates and Specialty Products Division of USG Corporation.

Business Tip – August 2012

Effective communication: it’s everybody’s responsibility

By Steve Rausch, USG Corporation

George Bernard Shaw once said, “The single biggest problem with communication is the illusion that it has taken place.”

Have you ever thought you’d heard exactly what someone else said only to discover later that you completely missed the whole point of the conversation? I have and it certainly isn’t pleasant. In the business world it makes for huge inefficiencies and wastes lots of valuable time. My question is: “Whose fault is it and how can we stop it from happening?”

The first part of the question is much easier to answer – it’s both parties’ fault.  The “SENDER” (person doing the talking) has a responsibility to clearly articulate all information that he or she wants to be heard. Senders need to use language that is clear and easily understood by all with whom they are trying to communicate. The “RECEIVER” (person doing the listening) has a responsibility to fully focus on what is being said and to ask qualifying questions to make sure he or she understands what is being communicated. A safeguard for both parties is for the speaker and the listener to either or both request that the other party restate in different words exactly what they heard. When the information is restated in different words you can usually tell if the listener clearly heard and understood what the speaker was attempting to communicate.

This skill is vital in both everyday life (think about some communications with your spouse) as well as in the business world. How many unhappy customers could you possibly have prevented (or prevented becoming) by taking a few extra seconds during the discussions to make sure everyone was clearly communicating what their wants/desires/needs were. In the words of Fyodor Dostoyevsky, “Much unhappiness has come into the world because of bewilderment and things left unsaid.”

The opposite of effective communication is “mutual mystification,” which is when both of you walk away believing you clearly understood what happened, only to discover later that neither of you clearly understood what the other party wanted. THE COURT SYSTEM IS FULL OF THESE CASES!

Try focusing on and practicing good speaking and listening skills this month to see if you can help yourself and your company obtain higher customer satisfaction ratings and lasting connections with your customers.

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Steve Rausch represents the Substrates and Specialty Products Division of USG Corporation out of Alpharetta, Ga. He’s also the author of the Rausch Ravings blog about business and non-business related topics. Contact him at [email protected] or visit the blog at http://rauschravings.blogspot.com/

Business Tip – July 2012

Go ahead, Tweet it: seven ways to capitalize on the social power of your satisfied (and not-so-satisfied) customers

Ron Kaufman, author of the New York Times bestseller Uplifting Service: The Proven Path to Delighting Your Customers, Colleagues, and Everyone Else You Meet (Evolve Publishing, 2012, ISBN: 978-09847625-5-2, www.UpliftingService.com) offers seven tips to take advantage of the rich network of fans, friends and followers on social media to spread your message and gather information to make you better at what you do. Read the highlights here and visit www.tileletter.com for the whole story. — Lesley Goddin 

We love telling people about our latest experiences, and we love hearing about what others have experienced. But author Ron Kaufman says many companies are missing out on tapping the social power of their satisfied customers.

“Companies should be saying to their customers, ‘If you did not enjoy our service, please tell us. If you did enjoy our service, please tell someone else,’” Kaufman said. “Tell happy customers to be social about their great experiences and encourage unhappy customers to come to you via social media so that you can make it right and improve your overall service.”

Kaufman notes that a lot of customer service is already being done online, customer to customer, through comments on articles, user forums and message boards.  Companies that embrace this behavior can improve their service and save on costs.

Kaufman said customers will “go out of their way to help a fellow customer find a solution, but for companies to do that back-end customer service there would be a cost. By engaging your customers to help each other, you can defray your costs, improve your customer satisfaction, and stimulate a loyal community by encouraging people in your online social space.”

How do you keep your customers spreading great things about your company while bringing their complaints only to you? Read on for Kaufman’s advice.

Make it easy for them to go social. Provide links in post-service surveys where people can share experiences and encourage them to do so. Kaufman’s website, www.UpYourService.com, offers a Spread the Word section that makes it easy for people to share their experiences.

Say thank you. Show a little love for the love your customers show you. Try a message of gratitude that says, “Thank you so much for spreading the word. As one of our happy customers, when you tell other people about us, it helps us grow and serve you better.” Don’t incentivize this behavior; it tarnishes the genuineness of the comment.

Invite them to reach out. Create a ‘Thanks for Being Social’ promotional piece that includes the company’s Twitter handles, Facebook pages, Yelp and TripAdvisor pages, helpful Twitter hashtags, etc., with a line that reads, ‘If you enjoy our service, please let the world know.’ Leave it with the customer after a job, or post it beside the cash register.

Ask how you can improve. Welcome good and bad instant feedback via social media. “Hear them out, provide them with great service, and then THANK them for sharing their experience with others via Twitter, Facebook…” Kaufman said.

Encourage them to recognize great one-on-one service. United Airlines’ “Outperform Recognition Program” encourages MileagePlus members to enter an exemplary employee’s name via a mobile app; both member and employee can win prizes in a random drawing. “Social programs like these boost employee morale, get customers focused on what employees are doing right, give employees another ‘measurable’ feedback for giving great service, and create a lot more ‘social input’ from customers to the company,” said Kaufman. Compliments received during this process can also be used in publicity campaigns.

Funnel customer questions through social media – then share the best answers. Ask customers to post questions on your Facebook wall, and answer them there for everyone to see. This shares useful information with other customers and enables your company to gather information.

Make talking about your brand irresistible. Provide service so great that customers simply can’t resist telling people about it. In a blog post on The Huffington Post, Chris Hurn, CEO of Mercantile Capital Corporation, shared how the Ritz-Carlton staff went above and beyond after his family accidentally left his young son’s favorite stuffed animal behind after a recent stay. The staff found and safely returned the stuffed animal and took pictures of its extended stay to show Mr. Hurn’s son what a great time his stuffed-animal friend had while staying a bit longer at the hotel.

“That blog post was seen by a portion of The Huffington Post’s 26 million monthly readers and was then tweeted, retweeted, and posted by many on Facebook,” Kaufman said. “Taking photos of a stuffed animal in funny situations didn’t cost Ritz-Carlton a penny, but it delivered social value in a huge way!”

“Your customers’ voices are vital to your organization,” Kaufman concluded. “Social media provides an incredible opportunity to engage those voices, to turn one customer’s great experience into an advertisement that attracts new customers and gets current customers thinking positively about you. It’s an incredibly advantageous way to address customer concerns and improve your company’s service culture in real time.”

Ron Kaufman is a premiere thought leader, educator, and motivator for uplifting customer service and building service cultures in many of the world’s largest and most respected organizations. Find out more about Ron at www.UpliftingService.com. 

Business Tip – June 2012

Are you a “vendor” or a “craftsman?”

By Steve Rausch, USG Corporation

How do you run your business, as a vendor providing tile and stone work, or as a craftsman creating beauty? There is a HUGE difference in compensation and the methods of doing business with your customers.

A vendor is someone who exists just to sell stuff. Nothing else matters except delivering the goods (may include installation) and getting paid. You can expect (negotiate) the low price, sign a contract, and get what you ordered. You can also spend many hours discussing the details of the terms and conditions, etc.

What happens with a craftsman is far different in many aspects. One element of doing business with a craftsman is that the price issue (or low bid) loses its luster. People seek out craftsmen for their skills and talents to create a beautiful statement with their efforts on the customer’s behalf. Price absolutely becomes a secondary by-product of most of those discussions. Time also changes; you don’t rush art by deadlines of time but rather by finishing the look or feel desired.

As we watch our industry still losing businesses to the poor economy, it becomes even more apparent that craftsmen will survive while vendors have a large chance of being pushed from the scene. Just look back over the past two or three years and recall how many businesses have already left the scene. Those companies that ran large crews to do anything and everything quickly and cheaply are mostly gone today; they were the worst offenders in this downward spiral of moving toward the bottom price. Without profit you just cannot stay in business and the very success that drove them to the top of the vendor pile was what did them in.

I ask you to stop today, take time out from “doing” your business, and study your business to see where you are on this scale of vendor versus craftsman. If most of your work is still “low bid”-driven, then you are on the vendor side. If, however, you have chosen to position yourself and your company as a craftsman firm, then you will, I’m confident, be around a long time in this business.

Steve Rausch represents the Substrates and Specialty Products Division of USG Corporation out of Alpharetta, Ga. He’s also the author of the Rausch Ravings blog about business and non-business related topics. Contact him at [email protected] or visit the blog at http://rauschravings.blogspot.com/

BUSINESS TIP – May 2012

Building your sales team

Flowing logically from our recent Business Tip sections on Job Description, Compensation and Recruiting Practices from the NTCA Reference Manual, the Sales Team topic in the Sales chapter of the Business Section details what’s needed for an effective sales team. 

Did you ever wonder why some people seem to be able to sell anything? I’m sure you’ve run across this type of person – and have probably bought something from them! In this section, we’ll talk about how to hire your sales staff, and we’ll address questions like:

  • How much experience should your sales reps have when you hire them?
  • How important are computer skills?
  • What should you look for?
  • What should you include in training for your sales reps?
  • What personality traits make one person a better sales person than another?
  • How do you know if you’re hiring a “star” or a “dud?”

Hiring the right sales people

When you begin the process of hiring your sales team, it pays off to first spend some time planning and setting up a budget. Advertising, recruiting, interviewing, and training are all expensive, and you don’t want to waste your time and money on the wrong candidates.

Before you interview your first applicant, have in place the compensation structure you plan to use. Depending on how attractive it is, it may be a good enticement for top candidates.

Write out the complete job description. For example, put in writing the leg work that must be done prior to making a sales call, how you expect existing customers to be serviced, how you expect records to be maintained, how many calls should be made in a week, etc. Think through the entire sales process and detail how you want it to be done, what tools will be used, and your expectations for their results.

This exercise should include not only what you want sales reps or account managers to do, but also how you want them to approach it. Think about the style of selling you want them to use.

Evaluating your sales candidates

You should have a good idea of the experience and skill level of your job candidates after reviewing the hundreds of resumes you’ve most likely accumulated. At this stage, you should be asking:

  • Have they been in front of people selling before?
  • Are they right out of school, or do they have a few years of experience to draw on?
  • Do you have a strong enough training program to allow you to hire recent grads with no experience?
  • Do they have what it takes to actually perform the technical functions of the job? – In other words, do they have computer skills?

There are a lot of things to think about. With selling, experience isn’t always the most important thing to look at, especially if you have existing sales reps that can assist in the training and mentoring of new recruits.

In order to be good sales representatives, your recruits have to have good research skills to find out about their prospects and know and understand their needs, their business, their business structures, etc. These skills can be taught, but experience in digging up the necessary information is helpful. These days, that experience includes internet research skills, as well as good old-fashioned research techniques – asking co-workers, making phone calls, and using business reference books at the library.

Communication skills

Your candidates also need to be good communicators. The majority of what a sales rep does involves communication –  both written and verbal. Whether it is explaining the specifications of your product or service or communicating how your prospect will benefit from the product or service, much rides on how this is articulated and negotiated. Pay close attention during the interview process to how your candidates articulate their qualities and “sell” themselves to you.

Technical skills

What level of computer skills do your candidates need? If you’re planning on using any type of contact management, then they  have to be familiar with the basics of word processing, spreadsheets, and maybe the fundamentals of relational databases. You should also look for knowledge of presentation software like Microsoft® PowerPoint. Many clients expect high-level presentations from sales representatives, so your reps have to be comfortable using technology, and in some cases designing their own presentations.

Outside sales

Outside sales representatives, also simply known as sales reps, are professionals who commonly travel to businesses or other organizations in order to sell their firm’s products or services. Maintaining contact with current customers and attracting new ones, professional sales reps make presentations to buyers and management or may demonstrate items to production supervisors. Salaries are typically at least partly based on performance since outside sales workers frequently receive commissions on their sales. Although many sales workers receive a base salary in addition to commission, some receive compensation based solely on sales revenue.

Inside sales

An inside sales representative position is exactly what it sounds like: selling products to potential customers from within a sales office. This means that an inside sales representative will primarily be speaking to existing customers and potential customers and following leads over the phone. Inside sales, where showrooms are involved, may require working with product selection for customers or their designer representative.

Most inside sales positions don’t require much more than a high school diploma. Most training is completed on-the-job. Inside sales representatives must be able to communicate effectively and persuasively both in person and on the telephone and good computer skills is essential.

For access to this entire document, as well as the information-packed NTCA Reference Manual itself, contact Jim Olson at [email protected] or 601-939-2071 to speak about NTCA membership. 

NTCA Reference Manual: Recruiting and hiring practices, part II

TileLetter’s Business Tip section will periodically feature excerpts and synopses from the new NTCA Reference Manual Business Section. Within the Organizational Development chapter of this document is Part II of information on Recruiting and Hiring practices for your company. Part I of this section – which addressed finding applicants and interviews – appeared in the Coverings issue of TileLetter.

Compensation

Verify the compensation structure to be sure it is in line with the position before making an offer to a job applicant. Publications are available showing the current compensation ranges for most positions. The compensation ranges are different for different parts of the country; make sure you are looking in your area. Ask the Better Business Bureau for the name of a firm who publishes this information or check the internet for salary and wage survey data. Industry associations are also a good source of wage and salary data.

Ask friends and contacts in the industry what the compensation ranges are for the position you wish to fill.

If you ask for salary histories from the applicants, and if they tell the truth, their responses will give you an idea of the general salary range of how much people are presently paying in your geographic area for the position you are seeking to fill.

Check references 

There are several basic questions that should always be asked including:

  • How are you acquainted with the candidate?
  • How would you describe the overall quality of his/her performance?
  • Would you hire this person again?

There are other equally-important areas that need to be covered that will be unique either to the firm or the job itself or possibly both. For instance, the person doing the reference checking needs to understand the culture requirements. For example:

  • Does the candidate need to be someone who can be an agent for change within the organization or someone who has the ability to maintain the status quo?
  • Will the job allow the candidate to continue his career growth and development, or will it be perceived as a dead end job?
  • What is the firm’s management philosophy?
  • Are firm personnel encouraged to be creative, or is everyone supposed to stay within the lines?
  • To what type of person will the successful candidate report: a hard-driving no-nonsense manager who takes a strong hand-on approach, or a more laid-back individual who delegates?

Reference-check questions need to be thought through carefully and are not to be asked in a vacuum. It’s one thing to inquire about a candidate’s past job performance. It’s quite another to determine whether or not that performance is relevant to the position being filled.

Suppose a candidate’s references all describe him/her as a person who prefers to work independently and who doesn’t require or desire much supervision to get the job done thoroughly and on time. Then suppose that the manager for whom this candidate will be working is very hands-on and likes to closely monitor the progress of projects he/she has assigned to subordinates. There could be a potential problem.

Suppose a prime candidate is described as someone who is ambitious and eager to move up within the organization by doing more than is expected and getting things done ahead of schedule. Then suppose that the person to whom the candidate will report is a solid performer who is content with the position he or she holds and the type of individual who goes out of his or her way to avoid controversy? Could that ambitious candidate be faced with a potential fast-track career advancement roadblock?

Even though a candidate receives what appear to be glowing reviews from references, these comments need to be put within a broader context that compares past performance to the nature of the job that needs filling.

It’s not just a matter of determining if the candidate is right for the job. Determine if the job is right for the candidate. Tailor reference questions to ensure proper fit.

For access to this entire document, as well as the information-packed NTCA Reference Manual itself, contact Jim Olson at [email protected] or 601-939-2071about NTCA membership.

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