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As I talk with kitchen and bath dealers around the country, one issue seems clear: Many dealers still lack the proper tools to help manage and control the costs of their business.
When I ask the owners or managers about their budget, they usually look at me with confusion. When I talk about the additional outlay of funds to support an additional staff person, they seem not to have the information I would expect from an owner of a company.
I believe most of us consider ourselves small businesses, and so many believe that we really don’t need to operate under the same guidelines as a larger business. But even though we’re small, we still need to maintain careful records so at the end of the year, we have profits to show for all of our hard work.
Now I realize that most of us are not accountants. That does not minimize what we can and should be doing on a monthly basis. Checking the status of jobs sold, jobs in progress and jobs completed is one of many tasks that need to take place in order to track your business and stay on budget.
A WORKING BUDGET
Budgets are the lifeline of any company, small or large. Without a budget, you will be shooting from the hip every time it comes to spending money. I am amazed at the number of dealers who tell me they know what they can spend on certain things based on how much money is in the bank. Sadly, that’s how they make the decisions for running their business.
While I’m not going to be showing you how to develop a budget here, I would like to share some tools to help you run a more successful business.
Your accountant can help you with this. When you have a working budget, you are less apt to spend money that you don’t have for things that come up unexpectedly. A budget forces you to follow pre-thought-out guidelines of what dollars go where, be it for advertising, new staff or showroom renovations. We all know how easy it is to spend money that is not allocated and then wonder why we lost money at the end of the year.
If you’ve ever built a house, you understand how this works. Every item needed has a line item with a number to it. When customers come into your showroom to pick out the cabinets, they usually know what the cabinet allowance is. They know that if they go over that amount, they’ll have to come up with the funds from another source. Sometimes they increase the loan or they decrease another area of the line items to get what they want for the cabinets.
The same thing applies to your business. You may want to purchase a new truck, but without more revenue or fewer expenses, you may not be able to do so. On the other hand, if after finalizing your budget you later realize that a new truck is essential, you may decide to purchase it and decrease the money from some other area of your budget. Either way, the expense is thought out rather than spur of the moment – something big businesses do as a matter of course.
One of the tools that our company uses to increase our existing capital is our membership in a buying group. The buying group allows small businesses, by working together, to acquire bulk discounts that they could not get on their own. Members earn rebate dollars for purchases that can then be used for other business expenses.
The products I sell that are in the group have rebates available to me to the tune of 2% to 10%. That means if my year-end figures show $500,000 in sales of vendor products, I have realized somewhere around $32,000 in additional income to spend on other things I might need.
Learning as much as we can about our industry is another tool that can help dealers compete with the big guys. This can take the form of association chapter meetings, industry seminars or continuing education programs, trade shows, product training by manufacturers, information gleaned from trade magazines, networking events and a host of other sources.
Buying groups can also be a good educational source that promotes networking with people from all levels of the industry, from manufacturers to other dealers. Peer learning is a great way to exchange best practices and improve your business.
Another tool that can improve small businesses is a review of how salespeople are paid, from the support staff to the installers and the drivers. There are numerous compensation models in our industry, some more effective than others. Studying different models may help a dealer save money – or inspire employees to sell more jobs, earning you more gross profits.
THE HIRING PROCESS
Another tool for improving your business has to do with the hiring process. While I have never had any formal training in hiring and firing employees, one thing I’ve learned from my peers is that hiring and firing the right way can save money, while doing it incorrectly can cost money. We certainly do not have a Human Resource division at our small company, but learning from some of the larger companies certainly helps to save my company money by understanding what we are and aren’t responsible for.
Having a Policy Manual that explains what everyone does or should be doing gives me a tool to have better communication. Having a No Harassment Policy protects employees and the company. Having printed copies of these policies and ensuring that company employees abide by them can provide protection against costly lawsuits.
Taking another page from big companies’ books, hiring people with a 90-day probation agreement allows for a “trial run” and forces us to sit down after 90 days and discuss the future. Sure, running a small business is tough enough without having to track new employees. But if you don’t do this, it may well be six months or more before you get around to talking with them. A probation period helps to ensure profit-draining employees are weeded out early – and protects against legal complaints if things don’t work out.
And what about doing driving record and criminal checks on employees? We are hiring people to represent us and they are driving our trucks, delivering our material and possibly entering clients’ homes. Don’t you want to know their backgrounds? Big companies check these all the time – and it provides added protection that can save you time and money in the long run.
Even aside from the financial protection these checks provide, we have an obligation to our customers to be sure that we have done our due diligence in screening the people working in their homes.
While some of these seem like small things, in conjunction, they can help small businesses act like bigger businesses, enhancing their profitability.
Stu Dettelbach, CKD, CBD, of SD Kitchens, in Baltimore, MD is former president of the National Kitchen & Bath Association.
Members of the BKBG address business strategies for kitchen and bath dealers in a regular bi-monthly column, appearing exclusively in KBDN.
Read past columns on Business Strategies, and send us your comments about this story and others by logging onto Kitchen & Bath Design News’ Website at www.kitchenbathdesign.com.