Fifteen years ago, we sold our first kitchen and bath firm. At the time, fellow dealers were incredulous. They asked us, "who would be dumb enough to want to buy a kitchen and bath firm?" They were sure that we had pulled the wool over some poor buyer's eyes.
Most dealers echoed a similar comment "Nobody will ever buy my
business, because I am the business." There was a universal
sentiment that we were just lucky sellers, and our buyers were
dumb, dumb, dumb.
But, who was it that was really dumb? Was it our buyers? Or, could it have been that many of our designer colleagues didn't have a clue that they were, in fact, running a business? If you were in our industry 15 years ago, you know the answer.
Since that time, there has been a change in attitude. It has come slowly, and it has been deliberate, almost painful. Yet, thankfully, business owners are beginning to recognize that there is real value in the enterprises that they have created. It is no longer uncommon to hear that someone has sold their kitchen and bath firm. I think this makes a tremendous statement about our industry that others are willing to take risks and make substantial investments to become part of it.
Does this mean that everybody should plan on selling their business? Maybe so.
Every kitchen and bath firm owner should understand that the
number one mission is to create equity. That means (oh my gosh!)
that owners must be motivated to create profit. No matter how you
look at it, in the end, it is all about the money.
Creating value doesn't happen by accident. It requires diligence. Getting and reviewing monthly financial statements is a must. Your objective should be maximizing the selling price of every project. Knowing exactly why customers purchase from you is imperative. You also must track which members of the staff contribute to profit and which do not. Expenses must be justified to ensure that they don't hinder making money. While all of these things take time, to not spend the time voids profits.
I've often been asked what a successful business looks like. The only answer I have is that it must look organized and professional. Other than that, I know of no one formula for success.
Not long ago, I visited a showroom that operated like a supermarket deli. A customer was asked to take a number, then wander around the showroom until he or she was called. When the number was announced over a loudspeaker, the customer went up to a raised sales counter and stood there while a designer took the client's measurements and produced a plan. The customer could see the design work in progress on a giant screen mounted on the wall behind the counter.
If you had asked me beforehand if such a concept could work in our industry, I would have said no. Yet, there I was, watching lines of people taking numbers and wandering around. There was no question in my mind that this business was producing profits and creating value. The owners had decided on a game plan, and they were working their plan better than anyone else.
Can you say that about your business?
Their format may be unconventional, but these owners created
good jobs for their staff. They have brought their business to a
financial position where their involvement in public service is
affordable. They also have developed an enterprise that can
eventually be sold when they are ready for retirement. If they
someday choose to cash out, they can leave with the nest egg they
created and, just as importantly, leave with the knowledge that
their staff would continue to be employed in quality jobs.
ENACTING STEP ONE
The quality and beauty of a showroom do not ensure success. I have visited profitable kitchen and bath firms located in a garage, in a residential townhouse, in a wood shed and out of the back of an old box truck. They all had one thing in common they paid strict attention to profit generation.
Conversely, I have been in beautiful showrooms that could not pay their bills. The design abilities of the owners of these showrooms went without question. Their lack of business acumen, however, left them insolvent.
Am I denigrating designers? Not at all. I have always been very proud of the design work that myself or my co-workers produced. It's just that doing quality design work is actually Step Two. Step One is figuring out how to be profitable.
If every one of us ran our company as if it was going to be offered for sale, we would all be better off. Just thinking that a sale could happen at any time would force us to be better business people.
Imagine if you had to explain all of your expenses to a potential buyer. Could you justify each one of them? If not, shouldn't you make some adjustments now?
Could you justify to someone else the job performance of every member of your staff? If someone is not pulling his or her weight, a buyer would want to know why the person is still on the staff. Isn't that a good question one you should be asking yourself?
If a potential buyer was looking over your shoulder, and asked if you could achieve higher margins, what would you say? Most of us would say that, yes, we could. So, why not get our act together and achieve that goal? That's exactly what someone buying your company would plan to do.
Could you tell an outsider that you have done everything possible to increase sales? Probably not. But, it's a pretty good bet that a potential acquirer of your company would immediately look for ways to maximize sales.
If a possible purchaser of your business asked you to explain all of the entries on your P&L or Balance Sheet, could you? They would want to know what they were and what they meant. Shouldn't you know the answers?
As our industry matures and increases in sophistication, it is more important than ever that we become better business people. The good news is that, as we heighten our business skills, we also create value in our enterprises. We can be great designers. We can be ethical business people. We can do good works for our community. We can create a business that has value, that has a legacy and that has staying power. But, we cannot do it without profits. In the end, it is all about the money..