Editorial

by Howard Shingle,
Carolyn Silberman

 

Everything including the kitchen sink, apparently. Out of the hordes of mail we receive in our offices every day-solicited and unsolicited-out popped a report one day on a study presented by the National Kitchen & Bath Association (NKBA) with direct and astonishing parallels with the window coverings industry. NKBA's Performance Analysis Report was conducted in conjunction with Arthur Andersen. It examined top performing kitchen and bathroom design firms (based on the highest return on their total assets for 1997) and compared them with typical kitchen and bath businesses. What sets the high-profit companies apart is very enlightening and noteworthy. • High-profit firms achieve a higher gross margin with the same product mix as the typical firm. If they all are selling the same basic products, then it seems obvious that some dealers are discounting while others aren't. Care to guess which is which? • High-profit companies achieve superior personnel productivity with comparable compensation levels as typical companies. Hiring, training and maintaining a competent, people-oriented staff is among a company's most important assets. If paying them more isn't working for you, perhaps treating them better is the answer. • High-profit firms spend less of their gross margins on non-people expenses, or fixed expenses such as rent, depreciation, utilities, etc., and maintain tighter control over them. • High-profit companies carry much less inventory than typical companies representing a significant advantage in cash flow. Rick Prohammer of Arthur Andersen summed up the study's findings this way: "Clearly, high-profit kitchen and bath firm owners are those who know the financial makeup of their businesses. They have a good understanding of their fixed and variable costs, and know them well enough to maximize profitability on almost each and every project they complete." The bottom line, literally, is that the high-profit companies reported sales growth of more than 20 percent in 1997 compared to 12 percent for typical companies. No matter what your business-specialty retailer, decorator, workroom, fabricator-it's still a business. Knowing every detail of what makes your company work is essential to making your company succeed.

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