Turnover is vanity and profit is sanity
Controlling sales margins and profit is essential to the success of any business. Consultant Paul Da Silva highlights why it is so important and outlines easy steps retailers can take to ensure the profitability of every project.
Turnover is vanity, profit is sanity. Sales for show, profit for dough. However you phrase it, the result is the same.
To a large extent, it doesn’t really matter how impressive your sales figures look on your accounts, it’s the profit – the bottom line you make on those – that really matters.
A lot of businesses across the KBB industry and beyond have reported an increase in sales recently and use those to indicate how well they are doing. But with costs rocketing, how much profit is there in real terms? And, most importantly, if you’re one of those businesses reporting an increase in sales, do you know what the profit is on those increases?
You sell a kitchen for X amount with a profit of Y. But things can change. A couple of extra panels need to be ordered because the client suddenly decides they’d like some extra shelving.
Or the customer asks for a couple of extra sockets to be added at the end of the install.
Or the cutlery tray was missing off the order so, as a gesture of goodwill, you decide to give them one free of charge.
All of a sudden, a lot of additional – or hidden – costs have hit the sale. You knew what your margin on this sale was when you took the deposit, but do you know what your final margin was?
This is one of the first exercises I go through with new clients. You must understand what profit you are making from every single job.
And there are certain things you can do along the way that will help.
Know your margins
Ensure that the selling prices and cost prices are up to date on whatever system you use to quote your kitchen and bathroom projects – whether that be a software package or a spreadsheet.
The number-one priority is making sure that cost prices are accurate at the time of every order. This will help you sell at prices that take into account any increases and ensure you aren’t selling at a loss, thereby preventing any nasty surprises when you work out your final profit figure on each project.
Check and double-check your plans
Make sure that every single project plan is checked and double checked – ideally by someone else from within the business – before confirming them with the end customer.
That means, making sure all of the units are correct, the trims have been calculated accurately, the worktop colour chosen is the right one, and all of the appliances are either listed on the quote or marked as “customer’s own” on the plan.
Annotating plans is a vital part of protecting your margin. And here’s why…
Let’s just say you have an infill in a project, for example, and you plan on using a wall end panel as materials, but don’t annotate this on the plan itself.
The fitter on site sees that an infill is required and decides he can get two fillers out of a base panel.
Suddenly, you’re a base end panel down and need to order one. If there are time constraints – which there usually
are – you may need to pay for a courier. Then there’s the cost of the panel itself and, if the installer then
has to go back to fit it, you may need to pay more
for their time.
If there is an infill required – or any other additional item, such as a waste bin, lighting, cutlery trays etc – annotate exactly what materials are to be used for it on the plan.
Back in the days when I was managing showrooms, I would check every plan before it was presented to the customer. If there were no cutlery trays included on the quote, I would give it back to the designer with the instruction to add one before handing the quote back again.
Why? For the simple reason that it prevented clients coming back to demand a free cutlery tray further down the line.
When you put together your contract for the customer, make sure every single aspect is covered, so that they know exactly what they are getting for their money and, more importantly, the things they are not getting.
It’s very easy for clients to ask for favours on-site.
“I’ve bought a small radiator for another room, would you be able to fit it?”
“I would like an extra light fitting in the dining room, could you just do it quickly?”
“Can I have another double mains socket fitted in the kitchen?”
The answer to all of this is, yes you can, but there will be a charge.
Explain what the charge is, what it covers, and get it agreed in writing by email or in person.
Margin ‘leakage’ costs small businesses a lot of money, especially in the KBB world. And, as an independent business, in tough times protecting every penny is essential.
So, in summary, sales are of course the major focus of your targets, but margin is every bit as, if not more, important.
Stringent processes and procedures are abso-lutely key to making sure you are protecting yourself, your business and your profit at all times.