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How To Build Your Business Into An Engine For Wealth!

Nov 14, 2019 10:39:54 AM

Yes, it is very possible to build your kitchen/bath or design/build business into an engine for
genuine wealth. The European kitchen industry serves as an excellent model to emulate. There
are six advantages that your European counterparts have acquired over the last several
decades that are keys to their impressive financial success. Indeed, their action steps have
empowered them to build chains of 20+ successful showrooms that have even spread over into
neighboring countries. What follows is a brief synopsis of each advantage.

Puzzle Silver-Gold

Advantage #1 – Financial Know-How. The European kitchen industry is driven by owners who
are businesspeople first. They truly understand that numbers run a business. And they use their
numbers to make intelligent business decisions, always advancing their operations forward.
Conversely, the American kitchen/bath industry is driven by owners who are designers first.
Their decision-making is based less upon financial analytics and much more upon gut instinct.
As a result, their operations lurch forward 2-3 steps and backward 1-2 steps. Very few have
ever achieved economies of scale. Once American owners finally realize what financial metrics
must be achieved to make a solid net profit they will be able to build their businesses into
engines for wealth. Mastering the financial side of the business is pivotal to achieving this goal.

Advantage #2 – Purchasing Power. For U.S. kitchen/bath design firms, the industry gross
profit average is 29% as reported by RICKI in the June 2017 issue of Kitchen &amp; Bath Design
News. By way of comparison, European dealers average 47%. That’s in part because nearly
90% of them belong to buying groups through which they purchase more than 75% of their
products at reduced rates. Plus they earn $100,000s in annual rebates that drop directly to their
bottom lines. By contrast, fewer than 7% of the estimated 6,000 American kitchen/bath dealers
belong to a buying group. Being design-driven, they tend to focus more on growing the top
revenue line than developing the discipline and means to increase gross and net profit dollars.

Advantage #3 – Higher Gross Profit Margins. Simply put, European kitchen dealers are
superior marketers than we Americans. First and foremost, they promote their buying group
affiliation as proof that consumers are receiving the lowest prices possible on quality cabinetry,
appliances, plumbing fixtures, lighting, countertops, accessories, etc. Most are one-stop product
showrooms with design, project management, and installation services, making it super
convenient for busy consumers to buy from them. Offering such an outstanding customer
experience, they are perceived as an excellent value. Marketing experts confirm that consumers
will absolutely pay more for outstanding service if there is proof of it. American dealers and
designers have not yet learned how to present the necessary proof. So they toil at 29% average
gross profit margins while the Europeans excel at 47%.

Advantage #4 – Sales Professionalism. The European kitchen industry cultivates highly
disciplined and trained sales professionals to sell kitchens. In the states, certified designers
expect their design solutions to pretty much sell themselves. So when a deep recession hits,
American sales designers are generally incapable of motivating the few prospects they have to
get off the fence. Furthermore, when economic times are good, and leads are plentiful, owners tend          to hire veteran CMKBDs to pick up the immediate sales load. Only later do they find out
that many of these design professionals come with bad habits, preventing them from achieving
the expected sales goals. In addition to lacking a bona fide sales training program where
recruits with grit can be developed and coached slowly to become successful, most owners lack
a highly disciplined – and proven - sales process that enable their personnel to flourish.

Advantage #5 – Strategic Community. During the 2008-2009 recession, thousands of U.S.
kitchen/bath design firms closed shop. Being fiercely independent, owners couldn’t see for
themselves the fatal flaws in their operations. Or they would have surely fixed them. During the
1970s, European dealers started forming kitchen buying groups. In the process, they learned
the value of belonging to a strategic community that not only buys product better, but supports
each other to become more successful businesspeople. Stephen Covey called this more
advanced stage of development interdependence. A strategic community enables people with
common interests and goals to “sharpen their saw” and gain a candid 3 rd party perspective on
how well their company is truly performing. Then, if remedial actions are required, colleagues
are held accountable for making those changes in a timely manner. There is a built-in monetary
incentive to do so: as the group’s purchases grow, each individual member’s rebates also grow.

Advantage #6 – Automation. Another valued byproduct of a strategic community is the ability
to pool resources for producing an asset that not any one member firm had the capability, time,
or capital to generate for itself. The asset then is made available to benefit each group member
at a fraction of the cost required to produce it. The highly segmented U.S. kitchen/bath industry
is possibly the only one that technology has left behind. It hasn’t seen any new industry-specific
development since CAD was introduced over 30 years ago to speed up the design of kitchens.
On the other hand, European kitchen firm owners have developed an automated dealer
operating system that speeds up the ordering and production of their projects. Technology like
that can boost revenue and profitability into the next stratosphere – a decided advantage!

With the development of 40+ group assets since its inception in 1994, all six (6) of these
European kitchen industry advantages are now available with a SEN Design Group
membership. Our Members call them the group’s “unfair advantages.” Because together
they have enabled our Members to close sales faster while averaging 31% higher gross profit
margins (37.95%) than the U.S. kitchen/bath industry norm (29%).

The newest exciting, and exclusive, SEN asset is the complete dealer operating system
known as NMS – short for Network Management System. More than 7 years and $11M+ in
development, NMS is destined to be a game-changer for its ability to speed up the sale, product
selection, ordering, and production of kitchen/bath projects. So much so that, with mastery
Members are conservatively expecting 2-3x revenue growth.

In short, the SEN six ‘unfair advantages” enable Members to kill their competition. To
learn more about these advantages, the 40+ assets that fuel them, and the special development
process that SEN advocates to turn your business into an engine for genuine wealth, contact
Greg Stebbins, SEN Director of Membership and Vendor Development ( gstebbins@sendesign.com ), for a personal online presentation.

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