Research proves that central to any company’s market dominance is something labeled a “SMaC Recipe” – a “set of durable operating practices that create a replicable and consistent success formula.” Indeed, the word “SMaC” stands for specific, methodical, and consistent. Now design firm owners in our industry may very well be specific in developing their floor plans and contractual documents for clients. But, as a group, they are mostly underdeveloped, reactive, undisciplined, and inconsistent in their business practices.
A solid SMaC recipe is an operating methodology for turning strategic concepts into reality – a set of sound business practices more enduring than mere tactics. It’s true that kitchen/bath dealers will attend seminars on best practices or share best practices in their networking circles. But rarely have owners worked on their businesses regularly enough to get these best practices completely – or correctly - embedded in their operations, blending them into an overall success formula that has sprouted multiple locations, blanketing a number of states and producing uniformly phenomenal financial results.
You could easily say that a SMaC recipe is a little like a cookie-cutter approach. You want to create a business that follows a recipe that’s similar to creating batches of consistently formed and tasty cookies. In other words, you do the same thing that you are already doing well, and you just do it over and over again. Repetitions hone skills, processes, efficiencies of scale, and wonderful experiences that produce genuine value, turning customers into raving fans. The net outcome of a cookie-cutter approach In the kitchen/bath business would be that a Ridgewood, NJ consumer should experience exactly the same satisfying educational sales approach, budget engagement, quality project installation, and customer service as her cousin buying a comparable project from the same branded showroom in Providence, RI.
SMaC Recipe For Kitchen/Bath Dealers
From our perspective of working closely with hundreds of kitchen/bath design firm owners on their business development over the last two dozen years, the following represents what SEN considers to be the ideal SMaC recipe for enduring business success in our industry:
- Develop 1,500-1,800 square foot showrooms easily accessible, visible to target customers, and designed as an educational center as well as displays of product in room environments; each showroom will have one complete, live Great Room Kitchen, a bathroom display, several smaller, themed functional center displays, a seminar space, child’s play area, conference area, cabinet comparison wall, sample room, storyboard, digital messaging center, and work stations for up to 4-6 staff people.
- Target steady 15-20% maximum revenue growth year after year so as to preserve superior customer service, satisfactorily develop staff and management systems in support of that growth, and maintain necessary gross profit margins.
- Developed during the 3-year annual budget preparation, have the company price formula equal the gross profit percentage necessary to cover the overhead, desired net profit, and probable 2% profit erosion on projects. So, for example, if one’s overhead (including owner’s market-rate salary), is 31% of projected revenue, and the desired net profit is 10%, then the multiplier over all costs would need to be 1.76 (i.e. 43% gross profit).
- As a mature organization, do not rely exclusively on referrals and past clients for business, but continue to invest 3-4% of revenue in marketing that produces highly measurable CRM results to generate quality leads and build the company’s brand.
- Develop design, project management, office, and sales staff – plus installation subcontractors - based upon detailed personnel specifications, furnishing on-the-job-training programs, written job descriptions, and career paths while inculcating them with core values and corporate culture.
- Using an Operations Manual, or industry-specific management software like NMS, train all Sales Designers to follow a written sales process designed around their prospects’ purchasing decision needs.
- Empower targeted customers to shop within the company by quickly and interactively developing a good-better-best budget with them for their project (which is the centerpiece of NMS software), thereby reducing any price resistance and making it easier - and much faster - to secure a retainer commitment.
- Embrace marketing strategies, educational tools/programs, and enterprise NMS management software that in tandem will have consumers perceive the company as far more professional and, most importantly, a better value than its competitors (despite operating at higher gross profit margins).
- Have all Sales Designers on a straight commission program, earning a percentage of the gross profit after accounting for the company’s “burden services” (i.e. project manager salary, truck driver salary, truck expense, warehousing, etc. built into the pricing formula).
- Visit the competition at least twice a year to assess their value proposition so as to have company personnel informed and capable of objectively discussing the differences with prospects.
- Develop a strategic plan that documents in detail the vision for the company when it is all grown up, annually evaluating the gap analyses of its operational definitions and creating critical success factors with staff to close those gaps.
- Belong to a buying group to leverage/reduce material costs, thereby increasing gross profit margins on projects; use rebates to finance Emergency/Growth Fund or Owner’s retirement.
- Engage a board of directors, advisory group, and/or industry-specific business coach to gain different perspectives on the state of the business, help determine the company’s economic driver (the single most important financial metric for which all business decisions are measured), and address new challenges.
- Take the net profit percentage planned in the annual budget (for example 10%) from every check received and invest it in a liquid portfolio that ultimately equals at least 12 months of fixed operating expenses; use this fund exclusively to finance either major growth/acquisition strategies or survival strategies during a recession.
Far more difficult than implementing change is figuring out what works, why it works, grasping when to change, and knowing when not to. Historically, kitchen/bath dealers can become easily paralyzed when faced with so many impactful decisions to make. Hence, the importance going forward of having a key business advisor, advisory organization, or board of directors accessible, bringing valuable experiences and perspectives, to help guide your kitchen/bath design firm through tumultuous times which are likely to continue for many years to come.
That position is central to the value proposition wrapped up in a SEN membership. You will earn more (and learn more) with us than without us. As proof, we invite you to attend our next 3-Day Semi-Annual Conference. We will cover the Conference Fee. You cover the travel and lodging expenses. Like so many previous guests, you just may find it to be your most rewarding, industry-specific educational experience.
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