Tips for Controlling Your Business

Who controls your business? As a kitchen and bath dealer, are you the one making the decisions that affect your bottom line and ultimately the success and of your company?
In the present business environment, many kitchen and bath dealers are no longer running their own firms. Suppliers, salespeople, customers and competitors are all gaining more influence. These additional influences can pull your business in an unprofitable direction if you're not meticulous in focusing your company on the right objectives.

As suppliers, salespeople, customers and competitors interact with your company, it's vital that you identify how they affect your business and develop a plan to keep them from steering your business off the route to success.

The most commanding outside forces influencing your business are your suppliers. Suppliers work very hard to gain as much influence in your business as possible. Displays, samples, literature and sales programs are all used to gain space and influence within your company. As an owner/manager, you must carefully weigh these incentives against the product's ability to generate the sales and profit margins you require.

Once suppliers are in your showroom their natural desire is to increase the sales of their products. In order to ensure that they're getting the largest portion of your company's sales, some suppliers endeavor to direct your business' sales from the inside. This inducement comes in the form of incentive programs.

Incentive programs are most effective when they are aimed directly at your salespeople. Rewards are presented and paid directly to your employees to manipulate what products your salespeople sell. If done in coordination with your company's goals and on a limited basis, these incentive programs can be quite effective for both the supplier and your business.

On the other hand, if these programs are continuous and you are not carefully monitoring them, incentive programs can be dangerous.

Incentive programs directed unchecked towards your employees can give suppliers undue control over your business. Once they have indoctrinated your salespeople and captivated them to their incentives, they have effectively taken control of your sales team.

You may find that sales in the product line are increasing but the margins are lower than your company requires. Product quality or expediency could decrease or, for whatever reason, you might determine that your company's needs are better met by another line. The suppliers' gratuitous influence on your sales force can make it very difficult for you to enact the changes that you deem necessary.

As the business owner, it's your responsibility to ensure that the influence suppliers command is limited to programs and offerings that help your business succeed.
Keep close tabs on these programs; make sure that you're a buffer between them and your employees. Control their programs to keep them from controlling your business.

If suppliers are the most commanding outside force influencing your company, salespeople are the most powerful inside force exerting control on your business. If left unchecked, a company's sales will be determined by the salespeople's preferences and familiarity with certain manufacturers' products.

Salespeople are invaluable to your company, but you need to ensure that they are selling the products that are profitable to you. They may have an affinity for products that they are currently selling or have sold in the past. They have familiarity and a comfort level with lines that they already know and obviously, it's easier to quote and sell products that you already know.

This is helpful when the products they're accustomed to are the ones that you're making your preferred profit margins with. However, if you're attempting to drive sales in other products, it can be a problem.

As the business owner/manager, you need to keep a firm grip on what sales are really the profitable ones for your organization, and to have a focused approach to training the sales force to sell these products. If you are lax in this area, your salespeople will control the products that you sell and you'll be gambling that these products are the ones that will keep you in business.

One of the most overlooked influences in your business is your customer. Your customers' tastes, wants and desires have an incredible amount of influence on your business, as they should. Customers, though, can also end up managing your sales.
As today's consumers shop around more, they have a propensity to offer dealers the opportunity to bid for their business on products that both you and your competitors carry. This is the simplest order for your business to take. All you have to do is be the low bidder, willing to work hard for less money. And, that's exactly what your company will do if you allow these transactions to take place.

Your business offers products that are not only a better value to that customer, but are also more profitable for you to sell. Manage your company and use your expertise to educate your customers on the value of the products that increase your bottom line. You'll find that selling is much more profitable than order taking.

Many organizations allow the competition to determine their profit margins. One of the most frequent questions I get from new customers is, "How much profit should I have in my quote?" I usually recommend at least 35 to 40%. Often the response is "I hear that my competitor is working at 20%."

Just because your competitor is willing to work for a 20% gross profit does not mean you have to. Why would you subject your company to that? You need to have a profitable long-term outlook. Determine your own future. Look for products that you can offer that are not commodities. Find products that allow you to determine how much margin you can make without getting into a bidding war for the same brand name product. Run your own business and determine your own profit margins.

Who controls your business? It better be you. There are many people influencing your company and pulling it in countless directions, but it is your business and your bottom line.

Printable version may be for personal use only. Content may not be duplicated, re-used or otherwise replicated without expressed, written consent from and/or Morgan Pinnacle LLC.

This article originally appeared in Kitchen and Bath Design News 7/2002

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