This past July I received a very interesting – and entertaining – book from my daughter as a gift for a milestone birthday. It was entitled Younger Next Year and written by a tag team of Chris Crowley, a former litigator, and his internist, Henry S. Lodge.
Crowley was an out-of-shape retiree when he was educated by his new doctor about the biological science of aging. Dr. Lodge told Crowley that your body falls into a default decay cycle starting in your 40s. You lose thousands of cells on a daily basis. The only way to reverse this process is through vigorous daily exercise – walking, jogging, cycling, kayaking – which grows new cells to replace the decaying ones.
According to Dr. Lodge, if you follow a strenuous exercise regimen for one hour a day (golf and tennis do not qualify), at least six days a week for the rest of your life (of which two days per week must be reserved for strength training), you will live a long, pain-free life. Of course, you must also cut out the “crap food” and snacks that you know are bad for you, too, and limit your daily alcohol intake.
Research has proven that devotees of such a program live wonderfully active lives well into their 90s. A fair percentage even pass the century mark. Indeed, if Crowley committed to such a program for the next 12 months, he would not only feel a whole lot better, but also “look younger next year.” The vanity motivation was enough for Crowley to make a commitment, and he experienced fantastic results.
Now I am a semi-retired person in decent shape who exercised 4-5 days a week for the last two decades. I usually jogged, or lifted weights at the nearby gym, for between 40 and 60 minutes a day. But I was so inspired by this book that I decided to kick up my fitness regimen.
Starting August 10th, I exercised strenuously for a full 60 minutes a day for 6-7 days per week. I dropped my ritual of eating a box of Raisinets at the movies and relegated glasses of wine to only on the weekend. By Labor Day weekend, I was down 10 pounds, down 5.5% in body fat, and my chronic back stiffness had disappeared. I certainly can’t say I looked younger. But I felt a whole lot better, was physically much stronger, and had a lot more energy through the day.
BUSINESS FITNESS REGIMEN
In fact, I was so pleased with the quick results that I immediately start wondering about applying the same vigorous fitness concept to the kitchen and bath industry. What would that look like? What resources would I need to educate and guide me into making my kitchen/bath firm stronger over the next year? In trying to put myself in the shoes of a kitchen/firm owner today, here is what I came up with.
First and foremost, I’d want to know how financially strong my business is today. Sure, my accountant may say I’m doing okay. But he doesn’t know a lot about the kitchen/bath industry, and he doesn’t seem to have much time to educate me about the desired metrics of construction firms in general.
I may be somewhat shy of earning a 40% gross profit on my latest income statement. Hitting that number seems to be the gold standard for the industry. But are there other, more important financial metrics that my company should be achieving in 2016? If so, what are they? And how do my recent 2015 results compare to the most successful dealer/owners in the industry?
Regardless of how long I may have been in the kitchen/bath industry, and how much my sales may have grown in recent years, there’s always room for financial and operational improvements. Time to swallow my pride and take off the blinders! If some of my metrics are indeed below this group’s average, what does my company need to do to match or exceed them? Are they even doable this year?
It’s like knowing exactly what your body weight and body fat percentage are today so you can establish realistic goals to fulfill a New Year’s resolution that you make. These “before” financial benchmarks would be critical information for me to learn. They would help me determine how much time I should allocate each day, week or month to working this business development and fitness regimen to close any key metric gaps.
JOINING A ‘BUSINESS GYM’
Next, based upon the benchmark comparison, I would focus on one or two key goals to make my business stronger in 2016. It would be exceedingly helpful if the benchmark comparison came with advice of how to improve my weaker financial metrics. In the absence of such recommendations, I would definitely want a bigger net profit in 2016 for the sheer risk and effort involved in designing and producing kitchens and baths seamlessly to fit like a glove for all my clients.
But what’s the best way of earning more net profit? Just generating 10-15% more in 2016 revenue won’t alone do it because there are variable expenses involved – overruns in the cost of goods sold, sales commissions, payroll taxes, etc. – that will diminish the net I make as an owner. And, the more my company sells and has to produce, the greater the risk of staff and/or subcontractor error. That’s the primary reason why my gross profit percentage on completed projects always seems to be lower than what the jobs were sold for.
That leaves (a) buying products and subcontract labor services better, (b) increasing prices, and (c) reducing overhead as the only impactful improvements to directly strengthen my bottom line. All are critically significant goals. But, on which should I concentrate my energies first? And how do go about accomplishing them?
Here’s where I would reach out to industry organizations to discover what educational resources would be available. It could be that one of these organizations becomes my “business gym.” After all, January is the traditional time of year to start getting in shape. Maybe there are proven pathways to achieve my business goal of a stronger bottom line. Or even published materials for such objectives as taking the correct steps to buy products better, to increase prices without losing sales and to reduce overhead while retaining quality personnel with key skills. Networking opportunities among the veteran “gym rats” might help me determine which objective should be addressed first and the best strategies to follow.
To stick with any regimen of value, whether a program for losing weight or improving my business’ bottom line, I would want to see progress along the way. So, I could see myself diligently marking off the dates when certain milestones on my development track are passed. That would give me a welcomed sense of satisfaction, enough to sustain my commitment in pursuing the business strengthening goal.
Between my morning physical exercise routine and getting ready for work, I would probably dedicate one solid hour early each morning at home to work on my business, such as reading, thinking and doing research on the Internet. Because I tend to work too much in my business, I would also block off Wednesday afternoons in my office to focus on other business development assignments.
However, there’s always the risk that I may get too busy in the business and fall off this disciplined schedule. And, since I am a self-employed kitchen/bath owner who doesn’t have to report to any superior, I could soon find myself not making any progress for weeks on end. It’s then that I would hire an industry-specific business coach to hold me accountable and get me back on track.
I probably would talk and strategize with him on one-hour conference calls every other week before he gave me my next homework assignment. His fees, as well as any other necessary training expenses like the “business gym” membership, could easily be covered by no more than a 1% price increase. And that would never be even the slightest of concerns if my “after” benchmark potential is up to a 50% stronger bottom line by the end of 2016.
That would be my take on adopting a vigorous development and fitness regimen to make a kitchen/bath firm financially stronger. I hope this strategic plan makes sense and holds value for your business in the New Year.
Ken Peterson, CKD, LPBC, is president of the Charlotte, NC-based SEN Design Group. For more info about this topic, please contact Peterson at 1-800-991-1711 or [email protected] Peterson also welcomes comments, questions or concerns.