Change and growth economyThere are signs that the economy may be recovering, with the National Association of Realtors reporting a 10% increase in existing home sales in September.  But the news continues to remain mixed at best, with September sales still 19.1% below September 2009.  And we all know that 2009 wasn’t exactly a banner year.  This past Friday, the President described our national economic recovery as “painfully slow.”

During this protracted recession, the cabinet industry has experienced an unprecedented shakeout.  Numerous dealers of all sizes have simply shuttered their doors, while others have trimmed their staffs to unimaginable levels in an effort to survive.  In fact, the Economic Policy Institute estimates that 1.9 million jobs have been lost in the construction industry, about 25% of the workforce.  Assets have been liquidated, unnecessary expenses eliminated, and contracts renegotiated in an effort to preserve cash and keep the business in operation until the “recovery” sets in.

It’s easy to fall into the trap of waiting for the recovery, slashing costs and cutting staff.  Darwin’s survival of the fittest will likely apply to the cabinet industry as well.  The question of when the cabinet industry will recover is certainly at the top of every dealer’s mind.  But an equally important question that may remain unanswered is whether or not your operation will be prepared when it does.

Think back to the good old days of 2004 through 2006.

At the peak of the construction boom, was your operation efficient?  In hindsight, did you make as much money during the good days as you could and should have?  Unless you answered “Yes” to both of those questions, ask yourself one more.  What have you done to make your systems more efficient?  To see if you are ready for the recovery, ask yourself these questions:

  • How do you capture and monitor sales opportunities?
  • What is your sales conversion rate?  By customer type?
  • How much time is invested in the design process?
  • How much time is invested in winning (and losing) an opportunity?
  • How much time is invested rekeying orders for purchasing?
  • How many mistakes, and at what cost, are made on an average order?  Why do they occur and could you prevent them?
  • How long do cabinets sit in your warehouse on average?  What’s the capital cost to your company?
  • What does it cost to deliver a job or even a single cabinet?
  • How long is your cash collection process?

Cabinet dealers and remodelers must continue to operate in “survival mode” for the foreseeable future, but they must also plan for the recovery.  Surviving this recession should not be your goal, but simply a step in the journey.  You have to take steps today to prepare your company for the next boom.