Trevor Scott, the owner of Rugby Fitted Kitchens, on why he moved into contracts, why it has worked for him and how it has grown to be 25% of his business
For many KBB retailers, ourselves included, contracts are becoming a more and more significant part of our business.
But what do we mean by contract? If you’re supplying the odd builder in your locale with a kitchen or two a year, then I would suggest these are trade sales, but if you’re supplying a number of developers with a volume of kitchens to fulfil a complete project, then this is what I would define as a contract. And this is a completely different kettle of fish.
RFK started out doing the former and, to be fair, I guess we always have supplied the odd trade kitchen, but up until about three years ago, we actively avoided getting involved in contracts.
Why? Well, going back over 25 years, I and my then employer, a well-established regional manufacturer and retailer, were basically put out of business during the 1991/92 recession following a large contract client’s regular flow of orders being turned off like a tap. Cash flow ceased and that was that.
So I vowed myself to avoid contracts like the plague, as I considered the risks to be too high, particularly for a fledgling business.
I’m sure there are plenty of KBB retailers who still feel that way and I don’t blame them. So what has changed for us and made contracts so attractive today?
The last recession resulted in even quite large developers realising they could no longer expect the extended credit terms from their KBB suppliers they had been used to.
Also, we, the suppliers, could no longer get credit insurance – and they, the clients, knew this.
Subsequently, doors that would’ve been closed before are now open and we can begin a dialogue with a potential new client and agree favourable terms or simply walk away.
But why do we now feel the need to expand into contracts? Surely retail is more profitable and the risk is limited to an individual kitchen?
True, but every new retail client requires a lot of effort for a one-off reward, whereas a contract for, say, 12 kitchens requires more effort up front, but not that much more to manage during its life cycle, yet will yield seven, eight or more times the return. Plus it’s repeatable.
Secure some more new clients and repeat. It’s scalable.
In the past three years, we have seen contracts grow to 25% of our business and, thanks to our increased buying power, margins are not at all bad.
We’ve had to adjust our infrastructure to cope. We increased warehouse capacity, employed new staff and put a rep on the road. But compared with the upfront costs of opening a new showroom, an exercise we’ve also been through, these costs have been manageable and forecastable.
But you must consider what your business can offer a developer that his current supplier can’t. Is it price, product or service? For most of us, though, I suspect it’s being able to give a more personal, retail-like, level of service that most developers aren’t used to. Ultimately, it’s about relationship-building at a more personal level than any large supplier can hope to emulate. Small enough to care, but big enough to cope…
Target your clients. Don’t go looking to pick up the next Barrett’s site, because you won’t get it, and anyway you don’t want to. Search out some of the many smaller, local and regional developers running small projects of between say six and 20 units a year. You will have something to offer these guys and it’s manageable for you.
Next is design. If you win the opportunity to quote for a site, even a small one, do you have the infrastructure to be able to turn around multiple designs and quotes quickly and in a professionally presentable format? There’s nothing worse than keeping a potential client waiting too long for their quote.
Product. Do you have a kitchen range suitable for the market you’re targeting? For us, our relationship with Nobilia was key.
Installation. Do you have enough fitters to cope with the increased influx of business without jeopardising your retail work?
Officialdom. Once you enter the world of contracts, get used to the idea of compliance and prepare ahead. Our Health and Safety statements run to a couple of hundred pages and cover everything from safe goods handling to what type of silicone sealants we use.
Are you, or your installers CITB registered and do all your installers have CSCS cards? I recommend reading the very informative piece written by Rob Mascari in August 2016
entitled – ‘CSCS card changes for kitchen, bedroom and furniture installers’ [www.mascari.co.uk/blog].
After-sales. Gear up to respond quickly and efficiently to issues arising following supply and installation. Remember, if you cock it up with a developer, you could be putting at risk a contract worth well over £100,000.
Finally, make sure your terms have been clearly defined and agreed in advance. Walk away if they won’t, then stick to them and stop supply if a payment is slow coming in.
A good point to remember here is that for most smaller developers, cash to continue the build is released by their financial backers in stages and one of the key stages is the kitchen going in. So no kitchen, no more cash. They will pay you.