Do You Know Your Numbers?

The first quarter of 2002 is coming to a close in a couple of weeks.

Do you know where your business is headed this year from the standpoint of numbers?
Not sure? Can't tell? Haven't had the time to sit down and get a handle on it yet?
It's amazing, the number of kitchen and bath dealers who respond to that question with those kind of answers. Or with a downward glance, an embarrassed shrug and a solemn, telltale shake of the head.

Stated another way, it's even more amazing how many dealers have no idea if the financial performance of their company is living up to its expectations. Many, it's frightening to report, don't even have a well-defined set of expectationsor any real means of measuring their company's performance.

They just drift along with their business, month to month, happy to stay busy, figuring they're ahead of the game if they're doing better than last year, often just trying to scratch out a living, sometimes struggling just to keep their head above water.

What's underlying this sorry state of affairs, of course, is the fact that a shocking number of kitchen/bath dealers still tend to operate without the benefit of any type of budgetand without income statements, or balance sheets, or cash-flow projections, or any of the myriad financial management tools at their disposal.

No wonder these dealers find it difficult to make any real money. No wonder they're forced to make key strategic business decisions in a vacuum. No wonder they can't, at any given moment, measure the true financial health of their company.

It's like trying to find a destination when you don't know where you are, don't know where you're going, and don't know how to get wherever it is you think you want to go.

The reasons for all this have been painfully clear for some time now: Many dealers, quite frankly, are simply uncomfortable with the "numbers side" of the business. Many have grown up in the design or construction side of the industry, and either don't like, or shy away from, financial matters. Many are skilled at design, adept at marketing; enamored of sales. In contrast, issues like budgets, balance sheets and income statements put them to sleep.

Similarly, concepts such as inventory turnover, cost of sales and debt-to-equity ratios cause them to break out in a cold sweat.

All of which is very unfortunate especially since a working knowledge of these type of financially related issues is what truly separates the men from the boys when it comes to success in the kitchen and bath trade.

These observations about the lack of any real financial management at many kitchen/ bath dealerships, not coincidentally, accompany the announcement of the 2002 schedule for the well-received "Managing For Profit" conference series. As in the past three years, this unique educational initiative co-produced by Kitchen & Bath Design News and'
the National Kitchen & Bath Association will focus on educating dealers about critical business management tactics.

The observations also coincide with an enlightening column written by SEN founder Ken Peterson (on how dealers can enhance profitability through thorough and effective budgeting.

As Peterson points out, budgeting is the single-most significant action a business owner can undertake to gain control of his firm's financial future. Stated simply, budgets do nothing less than enable you to establish prices, grow profit margins and allocate funds to support business decisions.

Other financial management tools, at the same time, can assist in controlling inventory, predicting cash flow, financing debt and measuring the results of ongoing operations.

All of which are necessary to avoid ugly, unanticipated surprises. All of which are necessary to turn a healthy profit. All of which are necessary to remain a viable business.

Take the time now especially if you haven't already to budget for the balance of 2002. Build your budget on accurate and detailed historical data. Be sure to accurately project revenues and estimate your expenses. Review the document regularly with your accountant, your banker, your peers. Look for areas to save, to spend, to improve and to make more money.

The New Year, in many ways, is only now just beginning. Don't try to arrive at the end of 2002 without a destination in mind, a plan in place, and a roadmap in hand.