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Make More Money in 2005 Than Ever Before
Here's how: Just think 3,6,9,12 and you will find your answer

by Steven C. Bursten

Economic experts say this will be the best year for business in years. Move-ins to new and existing homes should be at a record, boosted by low interest rates that drove building and buying to record highs in the last 12 to 24 months. With the right plan you can make more profit than ever before—especially if you operate a balanced business selling both product categories: soft products (draperies, valances and fabric-related treatments); and alternative products (blinds, shadings and “hard” products).

DRAPERIES ARE COMING

Fabrics and draperies will gather momentum in 2005, but will not hit stride until 2006-07 (see D&WC, December 2004, page 58). If you sell draperies, you will have a competitive edge. If you don’t now, start soon. But do not learn from a drapery expert. They will make it complex. It does not have to be. If you don’t sell enough draperies—and you want to—send for my bulletin “Drapery Selling Made Easy.”

If you sell mainly blinds and hard products, you are leaving tens of thousands of dollars on the table. These are customers who know you and trust you and will buy from you for a lifetime. But, that is another article. Let’s get back to profits today, whatever products you sell.

GOOD STRATEGY EQUALS GREAT PROFITS

In the past few weeks I have talked to at least two dozen window fashions retailers who want to grow to the next level, but aren’t sure how to do it. They represent all sizes and types of businesses, from seamstresses selling $10,000 a year to multi-million-dollar retailers with a dozen decorators.

As I listened to their situations, I realized the commonality of the issues . . . and how it boils down to operating practices for different sales volume levels.

There are five Humps or Comfort Levels in the window fashions business:

1. Start up to $300,000/year
2. $300,000 to $600,000/year
3. $600,000 to $900,000/year (“the minefield”)
4. $900,000 to $1.2 million/year
5. $1.2 million to $5 million/year and more.

As you might guess, there are thousands of window coverings professionals at the first level and only a few dozen at the highest level. Choose the level you want to be, then use this guide.

HOW MUCH PROFIT IS OUT THERE? HOW DO I EARN IT?

Your net profitability at levels 1 and 2 should be 28 to 33 percent after paying all rational expenses of the business. Net profit at higher levels should range from 10 to 20 percent after paying your own compensation for each function you perform.

What does that mean? If you had to replace yourself how much would that take? Start with sales. If you paid yourself 10 percent commission, how much would that be? If, in addition to selling you also manage the business, then calculate the cost of an operations manager to take your place.

• Level 1: From $0 to $300,000

The biggest hump is getting from no money to $100,000. Most micro businesses, those under $100,000 in sales, are either new to the business or workrooms—those who like sewing more than selling. The factors for both are the same: desire and a willingness to take risks.

Owners must want to grow. Next, they must be willing to risk doing things they are afraid to do. Whether promoting their businesses with flyers and phone calls, or finding someone else to sew while they learn to sell.

From $100,000 to $300,000 is a different challenge. It means building on confidence and experience by using systems instead of time. For example, closing on the first appointment by using pricing charts instead of laborious yardage calculations and labor costing. It means investing in advertising to create awareness. No one reaches $300,000 without advertising and personal promotion. You have to want it and be willing to go after it.

• Level 2: From $300,000 to $600,000

This is big money territory, and I mean profit money, not just sales money. With a contract installer and part-time paperwork person, a full-time owner can sell up to $600,000 a year. At that level, working from home with no overhead, you can earn 28 to more than 30 percent profit!

We were talking serious money in the $100,000 to $150,000 range, but this is a level of profitability you will not exceed until after doubling your sales. Why? Because this is the outer limit of personal performance; to grow higher you must transition to a managed business with commissions and increased advertising expense.

• Level 3: From $600,000 to $900,000

This is the level where everything goes to hell in a hand basket. I call it “the minefield.” You may be bloodied or blown back to where you came from. However, with careful planning you can make it to the other side.

This is the most difficult transition for a growing business: the change from a personal business to a managed business. Most—95 percent—of all window fashions owners will be winnowed out before reaching the $900,000 level. At this level you must have a store location. The amount you spend and where you locate are critical. Spend too little and you lose the benefit of creating leads through store traffic. Spend too much and it will bury you before you get going.

This transition requires adding at least one decorator, and probably two. Learning to hire, train and supervise decorators is as challenging as learning the window coverings business itself. Expect to fail a few times before breaking the code, but that is OK. It is the price of growing. Meet and mix with experienced business owners who have done it and can give you real guidance, not just theory.

This level requires that you reduce personal selling and turn some appointments over to others. Allow a year or more to move through this level. Develop a break-even analysis by planning your budget for rent, advertising and sales commissions. You may experience reduced net profit for a time, but you should make it safely to the other side of the minefield.

• Level 4: From $900,000 to $1.2 million

This is a consolidation phase. You probably will add another decorator. If you are still selling personally, your own sales should be about 25 to 35 percent of the total. The balance will be sales by your decorators. They will likely average about $300,000 in sales per year.

By the time you reach $1.2 million in sales you will have two or three decorators. This is a manageable level and usually results in a stable, managed business. It will allow you, as owner, to take vacations, work reasonable hours and have a family life separate from business.

• Level 5: From $1.2 million to $5 million and more

This is the final level of growth for an independent entrepreneur. Yes, there are industry giants who reach $20 million to $50 million and more, but that is beyond the scope of this article. Any normally bright, ambitious person can build a $2 million to $5 million business if he or she truly wants it. You must be willing to invest in advertising and make mistakes hiring people.

This level is different from others. There is something that happens when you try to hire the fourth full-time decorator. I do not know what it is, but some equilibrium becomes unbalanced. Four decorators plus an owner rarely exists in a window fashions business. You either grow to five, six and more, or fall back to three. Ask me for documentation and I cannot give it to you. But I have seen it happen over the years. Look around and see if you find any businesses with four decorators plus an owner.

COME ALIVE

In closing, plan your growth to “Come Alive in 2005.” Plan the highest profit you ever experienced.

This is the year to reap the harvest of your efforts. The stars are aligned—the economy is booming, draperies are coming back, and now your solid business planning will be better than ever. So, think 3, 6, 9, 12 (that’s $300,000; $600,000; $900,000 and $1.2 million), and decide where you want to be to earn the income you deserve.
Have a great new year.