Dave was disgusted with his wife,Sarah, for dragging him along; he didn't want advice from a so called expert as he knew how to run his diesel repair shop.

Being a mechanic was quite simple really and he knew the solution to their financial problems lay back in the workshop fixing up diesel engines of trucks and tractors, not talking to people like me.

The workshop is where the action is that’s where the money is made and if they were to have any chance at all at clawing back their business time spent with me was a waste.

Sarah sat beside him smartly dressed, smiling an apology for her husband's attitude, openly expressed as he sat hunched over the table, head in hands.

I met them after a planning workshop when Dave's brother asked me to talk to them and their accountant at a practical level as they seemed to be overawed with the concept of communicating directly with their accountant about their current situation.

John their accountant had met me on another occasion where we discussed the problem of accountants communicating fundamental busienss issues to their clients. So many business owners are technically focused and find “financial speak” a barrier to changing their business actions.

John told me they had sold their city home less than two years ago to relocate themselves and their two children to a country town, buying a diesel repair business with residence attached and mortgaging themselves heavily in the process.

Dave had been a workshop manager with a major trucking company and figured as he was making his boss rich, then why not work for himself. Unless a miracle occurred they looked like going out backwards in a matter of months.

"How busy are you?" I asked.

"Very busy" Sarah replied

"What do you charge for an hour's work?"

"$40" she said.

"How many hours do you work in the average week?"

"Oh I don't know" she replied, "but he works day and night"

"Well let’s say 60 hours a week, or 3000 a year" I ventured

"Dave works day and night and all weekends" she said nudging him to respond. Dave emitted a faint groan.

I wrote on a sheet of paper in front of them: 3000 hours x $40 = $120,000

"Did you get anything like this from hours charged last year?"

"Oh no!" Sarah exclaimed, "Nothing like that".

"They actually billed $40,000" John said, reading from the tax papers.

"We certainly didn't" she said adamantly.

"Well you did bill $30,000, of which $15,000 was cash and $15,000 still owing by debtors." John nodded.

"If you billed $30,000, and worked 3000 hours you must have charged closer to $10 an hour" I said

"No, I do all the billing, and I never charge less than $30 an hour" Sarah replied.

"In that case, you have charged out only 1000 hours or roughly 20 hours a week" I wrote it down on the sheet.

"You must have many interruptions." I stated

"Oh yes, the phone never stops" Sarah said

"Don't you take messages?"

"Yes, but they're all urgent and they want to talk to him right away"

I wrote PHONE on the sheet.

"Any other interruptions?"

"Oh yes, the farmers and the truckies" she said.

"What about the farmers and the truckies? I asked

"Well they walk straight into the workshop and start talking. Maybe they want an exhaust pipe welded or something. He has to stop what he's doing and attend to them and after its done, they say 'how much' and he says 'a couple of dollars' and they say 'put it on the account'." she added.

I wrote FARMERS and TRUCKIES on the sheet. "Anything else?"

"Well, there's the garage mechanics" she said

"What about them?"

"They came straight into the workshop and ask for advice".

"Why do they do that?"

"Well he's a top diesel man, the best in the region. He can pick a problem in an engine as its coming up the hill to the workshop, just by listening to it." She looked at him with a tinge of pride in her voice. Hunched over the table, Dave was silently shaking his head, anxious to be back in the workshop.

"Do you mean Dave can do the work in half the time of the average mechanic?" I asked

"A quarter" she said

"In that case he could charge $80 an hour and still be cheaper than the average mechanic" I exclaimed.

"Bullshit" rang through the air like a shotgun, expressing pent up disgust and disagreement over what was taking place, as though to suggest that if he charged $80 an hour he would be laughed out of business overnight.

Seeking a solution to what seemed to be a hopeless situation, I addressed Sarah:

This time I tried a different approach.

“What is the total cost of running the business for the year, excluding the parts for a specific job, and including the phone, power and all your overheads and including a sensible wage for yourselves?”

“Oh around $200,000 and that includes the part time guy’s wages and the apprentice as well”

“You didn’t tell me you employed people as well”

“A man needs a bloody hand now and again”, came the blunt reply.

“So you own the land and buildings, what do you think they are worth?”

“Yes and they’d be worth about $350,000”

“How about the value of the parts, and oils and equipment you have, what’s that worth?”

“Well dear what would you say?”

“$150,000”

“Ok so with $500,000 invested at say 7%, nothing fancy, you’d get $35,000 per annum. Let’s put this down in a sensible format”

“Can you see what I’ve done?”

“Yes that works fine on paper but remember I’m not worth that”

“This is what the business is worth per hour to use, remember this is not the hourly rate of someone being paid in their hand”.

"If you were twice as productive as a normal mechanic then if their billing rate was $40 per hour and yours was $80 then effectively the customer pays the same for the job who ever did it. The difference is you have the other hours to do someone else’s work to get paid.”

“But if we charge $79 per hour as you say we should for one person, we are double dipping as only one person is doing the job and we are charging for the three.”

“We included their hours in the 6,000 available hours and we included their wages costs in the Projected Expenses and then divided them by the productive charge out rate.

Well let’s look at it a different way. We’ve said there are 3,000 available hours and at $79/hour that makes $237,000.”

“Bloody hell that’s downright robbery”

“No it isn’t … we arrived at that figure using the totals you gave me. Look at the chart we drew up before. Is there something wrong with the Expenses, remembering that included the wages for you and the other guys and the business getting paid?”

“No that seems fair”

“Do you agree that the business needs to be paid for investing the money it has when it could have been placed in a term deposit?”

“Definitely”

The issue to remember is that this is an internal management target it’s not a comparison with your competitors. They charge less and take longer than you who charges more. It’s all about averages and targets.

We used an Action Sheet to spell out who was to do what. John elected to assist in getting the debtors collected, and Sarah agreed to accept responsibility for the 63 hours by $79 a week.

In saying goodbye to John later, I expressed a sense of my inadequacy concerning the interview. Sarah in particular, I felt, was expecting something really out of the hat from the visiting 'expert'.

A few months later, I bumped into John at a conference.

"How are they going?" I asked.

"Keeping their noses in front. The simple formula seems to be working." said John with a smile.

About eighteen months later, John told me they were out of their troubles and going well.

It was many moons later before I came to understand and grasp the importance of what had transpired. In reviewing the interview, I recalled that the target set for Sarah was a weekly one. That was a little unusual bearing in mind that I never previously thought in less than monthly feedback. But had I maintained the traditional monthly summary, I could imagine her informing the husband on the last of the month, probably around midnight as he eased his tired body between the sheets, "darling, you've only done 140 hours this month, you will have to do 180 next month to catch up". Apart from the unlikelihood of catching up on twenty hours, I could only guess his response to such an approach. But there was a good chance of catching up on a weeks deficit of say 4 hours.

Weekly feedback was obviously important and that would have played a part in their recovery. But that in itself was not an adequate explanation.

There was something more, and it only occurred to me much later: Sarah was not only administering the business, billing the hours, chasing the debtors, handling the demands of the bank manager and the suppliers, coping with the phone calls and all the other multitude of events in the day to day life of business, but she was also chief cook and bottle washer, bed maker and mother to two small children. Sarah was doing everything she could as best as she could, and all the time growingly aware of their life savings fading away with seemingly no way through.

Sarah in fact, had no focus where the 'rubber hit the road' in the business. Focus was 40 billed hours a week at an average of $40 an hour. When she got focus, the business got back on track. Simple enough surely, yet so vitally important.