The big guys grow not by getting more salespeople, but by getting the same salespeople to sell more. Many distributors have record growth year after year because they punch through their capacity constraints. There are some striking differences between what the most successful dealers and remodelers are doing differently from everyone else.
Now for the bad news, the grading scale is really tough. A score of 10 is perfect, 9 is ok, but 8 or lower and you have serious problems. A worrisome truth is that most cabinet operations are running with a score of 1 or 2, and they need serious help to improve.
Here’s a quick test to see how you measure up. The neat thing about the test is that it’s easy to get a quick yes or no to each question. You don’t have to figure out inventory turns, cash flow or average job completion times by customer. Just give your team 1 point for each “yes” answer.
- Do You Let Salespeople Sell? Salespeople in our industry have evolved to become “order takers” instead of salespeople. Why? Because they are so bogged down with manual pricing and paperwork. Too many salespeople hit the million dollar barrier where they cannot sell any more no matter how hard they try. The big guys allow their salespeople to sell more by keeping them out of the paper work world. If you want to do big business and your salespeople can’t handle $3M per year, you have to streamline your quoting process, give them more customer service support and insulate them from delivery problems.
- Is Your Purchasing Function Centralized? Salespeople that do their own purchasing are rapidly becoming an artifact of the old world. How many people do you think you would need to process purchase orders for $40M in revenue? If you answered more than 2 you have room to improve. The big guys don’t re-key their sales order information into their purchasing departments. All the information is already keyed on the sales side and that flows electronically to purchasing, shipping, receiving and accounting.
- Do You Provide Structured Training? It’s hard enough to teach someone the remodeling business, much less bring someone with experience in and expect them to conform to your way of doing business. Unless you drive structured training around an automated process, you’ll have challenges growing sales and profitably.
- Do You Take Time to Analyze Your Business? Do you ever analyze your business? The big guys know the key to growing profitably is analyzing where the true bottlenecks are, continually improving operations with that information and having the right system to improve. If you’re too busy processing orders inefficiently to even know what’s really happening in your business, you are at a bad disadvantage.
- Do You Compensate Your Employees Based on Profitability? Sound crazy? The only way to get salespeople, installers, or anyone else to focus on making sure YOU make money is to share that wealth. Think about this the next time your installer leaves those extra pieces of molding at the job site. Face it: nobody cares how much the company makes unless it is tied directly to their paycheck. You’ll be amazed at how fast jobs get completed and how many costs can be saved when your people are compensated on profitability.
- Do You Offer Standardize Programs for Your Builders? If your builders dictate what your style and options programs are for their house plans then you are allowing them to disrupt your business in a big way. Let them know you’re the best one to help them put together a program. You must develop a standard program of plans and options that is consistent and progressive for your builders. The big guys drive this process and enjoy consistency, less mistakes, less variability, better service, and better profitability.
- Are Your Processes Standardized? A standard, repeatable process is the name of the game. The big guys do it because the owners have already realized they can’t be at all their locations at once, but they need to be able to manage each location like they were there if they are trying to grow. This includes processes around quoting, pricing, purchasing, shipping, receiving and billing. If everyone is doing something different, management by crisis rules the day.
- Are You Attracting And Keeping Good Talent? Two things will attract better talent: (1) better compensation, and (2) a better work environment. Both of these will get you the best people available because word travels fast in the cabinet industry. The big guys invest heavily in tools that allow employees to be more effective, and pay them based on how well they perform financially for the company.
- Do You Expand Your Product Offering in Related Products? What else can you sell to your existing customers? It’s far easier to increase revenue by adding more products to existing customers than trying to acquire new ones. The big guys have this down to a science – it’s as easy as adding a new product catalog to their software system and away they go.
- Are You Opening More Locations? Once you have your company working effectively with these key success factors, it’s much easier to duplicate it and expand into other markets.
There are three ways to use this test:
- If you’re the manager or owner of a cabinet dealership,remodeling or contractor business, use this as a checklist to make sure your team is working as well as possible. When you start rating a 10, you can leave your team alone and focus full time on expanding the business and the relationships which bring in large revenue.
- If you’re trying to decide whether to take a job at a cabinet dealership, remodeling business, or the like, ask your prospective employer these questions and rate them. If it’s too low, make sure that you’ll have the authority to fix these things. Otherwise you’re going to be frustrated, unproductive and soon looking for another job.
- If you’re an investor doing due diligence to judge the value of a cabinet dealership or other industry operation, or if your company is considering merging with another, this test can provide a quick rule of thumb.