Do You Know Your Numbers?

by WOHe

The first quarter of 2002 is coming to a close in a couple of
weeks.

Do you know where your business is headed this year from the
standpoint of numbers?
Not sure? Can’t tell? Haven’t had the time to sit down and get a
handle on it yet?
It’s amazing, the number of kitchen and bath dealers who respond to
that question with those kind of answers. Or with a downward
glance, an embarrassed shrug and a solemn, telltale shake of the
head.

Stated another way, it’s even more amazing how many dealers have
no idea if the financial performance of their company is living up
to its expectations. Many, it’s frightening to report, don’t even
have a well-defined set of expectationsor any real means of
measuring their company’s performance.

They just drift along with their business, month to month, happy
to stay busy, figuring they’re ahead of the game if they’re doing
better than last year, often just trying to scratch out a living,
sometimes struggling just to keep their head above water.

What’s underlying this sorry state of affairs, of course, is the
fact that a shocking number of kitchen/bath dealers still tend to
operate without the benefit of any type of budgetand without income
statements, or balance sheets, or cash-flow projections, or any of
the myriad financial management tools at their disposal.

No wonder these dealers find it difficult to make any real
money. No wonder they’re forced to make key strategic business
decisions in a vacuum. No wonder they can’t, at any given moment,
measure the true financial health of their company.

It’s like trying to find a destination when you don’t know where
you are, don’t know where you’re going, and don’t know how to get
wherever it is you think you want to go.

The reasons for all this have been painfully clear for some time
now: Many dealers, quite frankly, are simply uncomfortable with the
“numbers side” of the business. Many have grown up in the design or
construction side of the industry, and either don’t like, or shy
away from, financial matters. Many are skilled at design, adept at
marketing; enamored of sales. In contrast, issues like budgets,
balance sheets and income statements put them to sleep.

Similarly, concepts such as inventory turnover, cost of sales
and debt-to-equity ratios cause them to break out in a cold
sweat.

All of which is very unfortunate especially since a working
knowledge of these type of financially related issues is what truly
separates the men from the boys when it comes to success in the
kitchen and bath trade.

These observations about the lack of any real financial
management at many kitchen/ bath dealerships, not coincidentally,
accompany the announcement of the 2002 schedule for the
well-received “Managing For Profit” conference series. As in the
past three years, this unique educational initiative co-produced by
Kitchen & Bath Design News and’
the National Kitchen & Bath Association will focus on educating
dealers about critical business management tactics.

The observations also coincide with an enlightening column
written by SEN founder Ken Peterson (on how dealers can enhance
profitability through thorough and effective budgeting.

As Peterson points out, budgeting is the single-most significant
action a business owner can undertake to gain control of his firm’s
financial future. Stated simply, budgets do nothing less than
enable you to establish prices, grow profit margins and allocate
funds to support business decisions.

Other financial management tools, at the same time, can assist
in controlling inventory, predicting cash flow, financing debt and
measuring the results of ongoing operations.

All of which are necessary to avoid ugly, unanticipated
surprises. All of which are necessary to turn a healthy profit. All
of which are necessary to remain a viable business.

Take the time now especially if you haven’t already to budget
for the balance of 2002. Build your budget on accurate and detailed
historical data. Be sure to accurately project revenues and
estimate your expenses. Review the document regularly with your
accountant, your banker, your peers. Look for areas to save, to
spend, to improve and to make more money.

The New Year, in many ways, is only now just beginning. Don’t
try to arrive at the end of 2002 without a destination in mind, a
plan in place, and a roadmap in hand.

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