The Compensation Survey (“The Wages of Design”) in the October 2008 issue of KBDN delivered a lot of useful information. However, from my perspective as a licensed business coach to industry design firm owners, some of the published results are also cause for worry or opportunity. Here are a few observations to share with your readers:
I worry if the reported $118,227 average annual owner’s salary (which included the value of perks) for a kitchen and bath dealership accurately reflects an adequate return for the owner. By definition, an owner’s return is the sum of salary, perks and pre-tax net profit expressed as a % of the firm’s income. I find most owners underpaying themselves by 25-30% for the jobs they perform; therefore, they don’t come close to the 18-20% target return an owner should earn for an operation with multiple salespeople.
I worry about how many owners took year-end bonuses in 2007 when their books were based upon cash-accounting. This accounting methodology inflates gross and net profit margins, giving owners a false sense of financial performance. Had they been on accrual accounting, it’s possible their firms were losing money, in which case, a year-end distribution would be an unwise decision. It would also have aggravated cash-flow problems in 2008 when most of the industry is suffering a serious slowdown.
I worry about the 30.1% of owners who pay commissions based upon the selling price. In my judgment, the simplicity of such a methodology invites disaster. Without a singular team focus on a minimum gross profit goal that must be achieved in each job, there is little hope of adequately collecting enough dollars to cover the firm’s overhead and net profit.
I worry most industry owners don’t realize a proper Pricing Formula and Commission System are the direct byproducts of a firm’s annual budget.
Many owners may be overpaying their sales designers at the expense of inadequate indirect production overhead collection. It would have been helpful if the survey tied the average sales designer’s annual compensation to (1) how much income was actually sold and substantially completed from their individual projects in 2007, (2) what the average gross profit percentage was on this produced book of business, and (3) what their job descriptions constituted.
I worry industry owners and sales designers may not have any disability insurance. Actuarial rates confirm the risk of someone becoming disabled is much greater than being killed.
I see an opportunity for owners to offer retirement plans as a key perk to attract employees when so few dealers offer them. America’s savings rate is zero and Social Security may not be there for younger generations unless our government takes real action soon. The combined magic of “dollar cost averaging” (monthly investments in the stock market) and compounding annual interest over a 25-30 year industry career can catapult even a person with an average salary to a millionaire level in retirement accounts.
This opportunity is greater now with the stock market down so far. Owners would do well to exercise some leadership by educating themselves on the various plans available. Properly presented, staff should value such a perk and applaud owners for considering their long-term interests.
Finally, I see an opportunity for your readers, who are intent on improving their financial returns, to gain knowledge at the business seminar KBDN and SEN Design Group host entitled “Critical Managing, Marketing & Selling Strategies In Today’s Economy,” to be held June 26 in Milwaukee, WI and October 16 in Stamford, CT. It should be required attendance for startups, struggling dealers and operations destined for strong growth once the market turns.
When the industry is experiencing so much pain, it’s unfortunate business management seminars have historically taken a back seat to design and sales seminars. Manufacturers of all product categories would, indeed, be wise to encourage their dealer accounts to experience this program. After all, it’s in both their short- and long-term interests to have a dealer network with enhanced business management skills.
John Lang LPBC
SEN Head Business Coach
Lang’s Kitchen & Baths
Reader Cites Radiation Risks With Granite
It’s telling that the Marble Institute of America continues to say the supposed granite and radiation “scare” is simply a tactic from competing companies. Yet they are consulting product liability lawyers?
The MIA knows full well the hazards of some of the stone out on the market and it scares them. They are working with Airchek, a radon lab from North Carolina and also Hulligar from the Natural Stone Restoration Alliance.
Hulligar tracked down a “hot” Niagara Gold granite and had it installed in his apartment to try to dismiss the radon issue. He sent a core sample to Airchek which they brought with them to the AARST conference.
We attended the conference and brought our PM1703 gamma scintillator. We tested the core sample and it registered 1,080 uR/hr! Background radiation is around 5 uR/hr. Our measurement was only gamma radiation not alpha or beta, so you can imagine the total radiation a person is being exposed to standing at a “hot” counter. A person is only supposed to be exposed to 360 mR for the entire year. A person could potentially be exposed to 800 mR over the year just from this granite!
The MIA is consulting lawyers because the MIA is afraid of lawsuits. If the MIA had been responsible years ago, these stones would never be at market. They lied and they continue to lie.
The Carpenter Shop
Oklahoma City, OK
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