10 Ways to Make Your Business Stronger

authors Dan Luck | November 20, 2020

It’s a dirty word, and I refuse to speak it anymore unless forced. It has disrupted and altered all plans for 2020. I’m tired of hearing about it, much less talking about it, regardless of the name: pandemic; coronavirus; COVID-19.

Whatever you choose to call it, this major business disruptor has forced kitchen/bath business owners across the country to learn new skills such as showroom safety, adopting new fashion mandates (masks) and managing personnel remotely. Plans, budgets and dreams for the year have either been placed on hold, cast aside or tossed away completely. The distraction has caused many to lose focus and take their eyes off the prize. The lack of focus is killing momentum and infusing a negative impact on all kitchen and bath operations.

The bright spot through all the dark clouds is consumer demand. Homeowners, isolated in their abodes, see firsthand the inefficiencies of their living spaces. When exposed to it every day, the pain is more acute and increases the desire to seek professional assistance. To that end, dealers should pivot and focus on what is essential now and create action initiatives that make their businesses stronger.

Through years of analyzing financial statements, studying business models and critiquing kitchen and bath business operations onsite, I’ve compiled a list of best practices aimed at making kitchen and bath businesses stronger. What follows are my top 10 business practices, presented in reverse order:

#10: Know Your End Game

When it comes to achieving goals, Stephen Covey said it best in his book The 7 Habits Of Highly Effective People: “Start With The End In Mind.” Most well-intentioned owners may very well start with an end-game for their business, but lack the discipline to pull it off. A communicated written vision and a precise roadmap to get there are necessary. That’s what a strategic plan will do for you: planning for tomorrow, today.

#9: Sharpen Your Saw

There’s a compelling need in this industry for “saw-sharpening” – in other words, leveraging self-discipline to gain greater riches. That means preserving and enhancing the greatest asset you possess: you. It means having a program for self-renewal in the four key areas of your life: physical, social/emotional, mental and spiritual. A saw can get dull when repeatedly used; it needs sharpening to work more efficiently. With all the stress in developing, selling and producing kitchens and baths, sales designers must sharpen their saw regularly. Otherwise, mental fatigue leads to poor decision-making – which, in turn, leads to an up-and-down, herky-jerky rate of growth.

#8: Motivate through Emotion

In the kitchen and bath industry, most sales designers seem to think that their designs should sell themselves, and that a logical presentation that demonstrates a logical solution to a prospect’s set of issues should carry the day. But while prospects make decisions intellectually, they buy emotionally. Gaining emotional traction starts with the first meeting and carries throughout. Asking the right questions and discovering the real needs and pains of the prospect must take precedence. Sales designers should use these discoveries to provide a solution whereby prospects are emotionally engaged and locked in.

#7: Collaborate on Price

Research shows that it’s challenging to convince people of anything. But prospects will convince themselves that a kitchen or bath project’s price is right when they’re involved in the process. Too often, designers feel a need or desire to be a hero: swooping down in a red cape and saving the day with an award-winning design for which they take sole credit – and ending up losing the sale. Instead, sales designers should assume the role of a guide, working hand in hand with prospects, guiding them and involving them in the process – and, in turn, making them the hero. When you collaborate with prospects on developing a budget, they end up “owning” the price. The result is far less price resistance. This approach will make a transformative difference in sales production.

#6: Bottom-Up Team Development

After the cost of goods sold, personnel payroll is the most significant expense on an income statement. Appropriately organized – and armed with unique skill sets and management systems to control all the project details – your personnel team can make a major difference in the quality, appearance, function and performance of a new kitchen or bath. Create an in-house strategy to develop a team from the bottom up by building your productive personnel team. Develop a comprehensive training regimen that moves an entry-level team member upwards in your organization, providing opportunities for success across all departments. By giving your team everything they need to be productive – training, sales tools, infrastructure, mentoring and leadership – you’ll get what all owners treasure: emotional ownership in your company by your personnel.

#5: Sell More into Every Job

The recession of 2008-2009 taught a lesson that the current pandemic has confirmed. With fewer prospects, it’s paramount to sell more products and services into every project. It’s far less costly to add more products to each project than to attract another lead, especially if COVID-19 fear reduces your prospect base. Today’s prospects are short on time and desire a stress-free shopping experience. Kitchen and bath professionals who provide a one-stop showroom experience will best serve today’s consumers. Providing buyers with access to everything from cabinetry to tile, lighting to plumbing fixtures, will provide an exceptional customer experience and set the stage for strong revenue growth and enduring financial success.

#4: Account for Burden Expense

One of the main reasons why the majority of kitchen and bath dealers have only marginally profitable operations is that they fail to account for their burden expense in their pricing formula. Left unattended, it spells disaster for any operation, regardless of how well they perform in other areas. Burden is defined as all the indirect costs to a project that are difficult to identify and capture. An expense such as a project manager’s salary, truck expenses, warehousing, production staff benefits and shop supplies are just a few examples of a burden expense. Each operation should perform a burden calculation exercise and include it in their pricing formula and commission system. Failure to do so will prevent a business from experiencing its full profit potential.

#3: Focus on Gross Profit Dollars

I recall sitting at a roundtable years ago in which the facilitator posed a question about each participant’s company’s size. Everyone shared their revenue achievements (high testosterone levels were on display with each answer). A second question focusing on profitability triggered immediate silence. No one volunteered to go first to share their numbers. Gross margin dollars, or gross profit percentages, are the two most important numbers on your income statement. In other words, it’s not how much you sell, but how much money you make on each job sold. If you don’t mark up your jobs high enough, you won’t have enough gross profit dollars to cover your annual overhead, owner’s salary and desired net profit.

It’s a detail everyone on your team should be focused on. Each project you sell needs to generate a gross profit, commensurate with the sales price, which proportionately contributes towards the annual total budgeted expenses and net profit goal. Without this focus, dealers are left with chronically weak bottom lines.

#2: Know Your Numbers

Numbers tell a story. Numbers run a business. If you don’t read your financial statements, and understand what they’re saying, you’re driving blind. If you know how to read them, but don’t leverage the information the numbers reveal, then your business succumbs to underachievement. In short, you’ll be buying yourself an underpaying owner’s job with more headaches than working for someone else, while earning higher pay and fewer headaches. The kitchen and bath dealer landscape is dominated by owners who know how to design and sell kitchens successfully, but very few have disciplined themselves to learn the financial side of the business. Until this happens, few owners will realize their full growth and profit potential, develop sufficient reserves to fund a comfortable retirement, nor have others drooling to buy their businesses at premium prices when they’re ready to exit the industry.

#1: Leverage Technology

The number-one practice to make your business stronger is to leverage technology. Technological advances are all around, and yet it appears our industry is a slow adopter. Introduced more than 30 years ago, memories of CAD resistance still linger. Today, most of us can’t imagine life without CAD. What have we universally accepted since then? Will it take another 30 years for another tool to be entirely accepted? While each of the 10 best business practices I’ve outlined is important, technology by itself is a force multiplier because it amplifies the positive impact from the other nine. Technology, when leveraged correctly, can be that singular throttle that speeds both growth and profitability, zooming your company way past the competition. That’s a goal we should all seek with vigor. ▪

Dan Luck owns Bella Domicile in Madison, WI. He has been a SEN Member since 2002 and has led the SEN Leadership Team since 2018. As senior v.p./education, he will be conducting online Kitchen & Bath Business Roundtables into 2021 entitled “3 Keys for Maximum Profit: Price Formula, Sales Process, & Operating Platform.” Dan welcomes questions and comments at [email protected]

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