Don't Be Blindsided By Prosperity

The decade of the '90s, which opened on such a sour note for the kitchen and bath industry, is going out on such a resounding high this month that it's almost a shame to see it end.

Business is that good right now; most everyone you talk
to seems to be riding the crest, staying busy, remaining upbeat, having fun, making money.

In fact, as an exciting new millennium dawns, it's no exaggeration to suggest that the kitchen and bath industry is probably as vibrant as it's ever been. It's also no exaggeration to suggest that the industry is as rich as it's ever been with promise. Fueled by an unparalleled array of economic, demographic and lifestyle factors, the kitchen and bath market strong as it is is seemingly ripe for even more growth, as household wealth climbs, the job market remains solid and consumer confidence continues to soar.

Yep, business sure is good these days.

About as good as it gets.

Maybe, though, it's just a little too good for some kitchen and bath dealers.

Especially those who insist on doing business with legs moving swiftly, arms greedily extended, blinders obscuring their vision, and revenue growth distorting their sense of perspective. Or those who've gotten sloppy, and have forgotten to practice sound business basics. Or those who don't understand the nature of business cycles. Or those who haven't learned from history.

Not to throw a damper on things, but the fact is that the business climate as positive as it is right now will eventually turn the other way, following its historically cyclical pattern of boom or bust. In other words, the kitchen/bath market, strong as it seems right now, will inevitably soften to some degree.

And that's precisely why this is such a dangerous time for so many independent kitchen and bath dealers even though, ironically, they may be experiencing their greatest success.

The truth is that good times, enjoyable as they are, often mask serious operating deficiencies that businesses can get away with only when orders are pouring in, as now.

When times are good, for instance, weaker-than-desired margins somehow don't seem to matter quite as much to some dealers, who figure they can make it up in volume. Similarly, it doesn't seem to matter quite as much to some dealers what their competitors are doing, because they figure there's enough business out there to go around for everyone. Likewise, attendance at educational programs, trade shows, association meetings and related industry events lose their significance because who can afford time away from their business?

People don't tend to scrutinize their business as carefully when projects are plentiful; they don't attack problems as readily; they don't see the need for cash reserves; they often fail to control overhead.

In short, they fail to recognize the poisons that can seep, quietly and unnoticed, into a business when things are going well.

All these deficiencies can come crashing in on dealers in a heartbeat when the inevitable business downturn arrives and can prove catastrophic to those who bury their head in the sand and busy themselves counting their money when times are good.

It happened not too long ago, in fact, when many dealers who rode the wave of prosperity through the latter half of the '80s fell like dominoes when the recession of the early '90s hit.

All this is not meant to imply that a serious downturn is imminent. It is, however, designed to serve as a warning that boom times are no time to get complacent about how you run your business. They're no time to assume all is well, simply because cash flow is positive; they're no time to ignore problems that don't really hurt at least for the moment.

Things are all well and good as long as the market continues to expand as it should for at least the short-term future.

However, the companies that will remain in business for the long haul are the ones whose management has learned the hard lessons of history, and who've built their businesses to withstand the changing winds of a fickle market.