Several years ago, I attended a conference where the keynote speaker posed a question to the audience, an item that still resonates with me today: “What’s your unfair advantage?” The question prompted the audience to identify the unfair advantages they have in their local market area that, once identified, could be leveraged and marketed to the max.
That simple question was on my mind for a long time and prompted a discussion with my teammates at the SEN Design Group. Can unfair advantages be identified for the kitchen and bath industry that, once identified and adequately leveraged, can propel a business to zoom past their competition?
In sports, we know that speed kills the competition. The same is true in business. Amazon is ample proof. The pace by which you gain and deploy key advantages will accelerate your revenue and profitability growth way past your competition. SEN has answered the question and identified the six most important advantages to develop and market in tandem. What follows is a brief summary of each advantage.
Advantage #1: Financial Know-How
Numbers run a business. They tell a story revealing the health and vitality of that business. The most successful entrepreneurs understand their financial statements and use them to make intelligent business decisions, always advancing their operations forward. Unfortunately, most kitchen/bath firm owners were raised and groomed on the design and sales side of the business and rarely properly trained in areas of finance and management. Their decision making is based less upon financial analytics and much more upon gut instinct, setting the stage for erratic growth and marginal profitability. Once owners understand what financial metrics must be achieved to make a solid net profit, they will be able to build their businesses into genuine engines for wealth. Mastering the financial side of the business is pivotal to achieving this goal.
Advantage #2: Purchasing Power
For U.S. kitchen/bath design firms, the industry gross profit average is reportedly 29% (June 2017 issue of KBDN). By comparison, European dealers average 47%. That’s in part because nearly 90% of them belong to buying groups through which they purchase more than 75% of their products at reduced rates. Plus, they earn $100,000s in annual rebates that drop directly to their bottom lines. By contrast, fewer than 7% of the estimated 7,000 U.S. kitchen/bath dealers belong to a buying group. Being design-driven, they tend to focus more on growing the top revenue line than developing the discipline and means to increase gross and net profit dollars.
Advantage #3: Higher Gross
Experts consider companies that consistently operate at 3-5% higher margin than their industry norm to be superior marketers. As such, the most successful kitchen/bath dealers are one-stop product showrooms with design, project management and installation services, making it super convenient for busy consumers to buy from them. Offering an outstanding customer experience, they are perceived as an excellent value. Research confirms that consumers will pay more for exceptional service if there is proof of it. Developing and executing a customer experience that turns prospects into raving fans can have an immediate impact on gross profit margins.
Advantage #4: Sales Professionalism
Most people selling kitchens and baths prefer to consider themselves designers, not salespeople. They expect their design solutions to pretty much sell themselves. So, when a deep recession hits, sales designers are generally incapable of motivating the few prospects they have to get off the fence. Those lacking the sales know-how are stricken with fear at the thought of having to prospect and nurture additional leads for their sales pipeline. Most dealers lack a bona fide sales training program where all sales designers are trained in a highly disciplined sales process and are delivered consistently by the entire sales staff. This ensures all prospects receive the same experience, and every sales designer follows the same system. The owner who understands and embraces sales professionalism provides the opportunity and resources for personnel to flourish.
Advantage #5: Strategic Community
During the last recession, hundreds if not thousands of U.S. kitchen/bath design firms closed shop. Being fiercely independent, owners couldn’t see the fatal flaws in their operations because they lacked the perspective to identify and fix them. Early in my career, I sought the counsel of my peers, initially to see where my business stacked up compared with others. Engaged in this strategic community provided the perspective I needed to work on being better tomorrow than I am today. Buying groups, local association chapters or other peer groups provide a strong foundation for this to occur. The support, advice and encouragement members receive enables them to become more successful businesspeople. This more advanced stage of business development is called interdependence. Strategic communities allow people with shared interests and goals to “sharpen their saw” and gain candid third-party perspectives on how well their firms are truly performing.
Advantage #6: Automation
It’s no secret that our industry lags behind others in technology advances. Not since CAD, introduced over 30 years ago, has another industry-specific tool been developed and launched that can improve productivity and operating efficiencies. Another valued byproduct of a strategic community is the ability to pool resources for producing an asset that not any one firm had the capability, time or capital to generate for itself. The asset is then made available to benefit each group member at a fraction of the cost required to produce it. Today, technology platforms are available that can boost productivity and profitability into the next stratosphere. The problem is acceptance – by the dealer. In the early days of CAD, traction was challenging to achieve. Excuses were everywhere; hand-drawn plans were far superior to anything a computer could generate. Today, most of us wouldn’t even consider drafting a kitchen without turning on our computer first. Automation is a game-changer for its ability to speed up the sale, product selection, ordering and production of kitchen/bath projects. The dealer who embraces that first, like CAD, has an unfair advantage.
The next time someone asks, “What is your unfair advantage?” you won’t have to think too hard. Embrace, leverage and execute these six unfair advantages and sit back and watch your business zoom past the competition. ▪