Know Where You’re Going in ’01

by WOHe

Steve Vlachos and Hank Darlington have a pet saying when it
comes to budgets and the direction they provide kitchen and bath
firm owners.

Budgets, the two management consultants observe, are like
roadmaps: With them, kitchen/bath specialists can easily access the
roads they want to travel; without them, those same business owners
can quickly lose all sense of direction.

Then again, as Vlachos and Darlington note, any road will do for
those who have no idea where their business is going.

Kitchen and bath specialists, getting ready to turn toward a
promising New Year, can ill afford to travel on just any old road
in 2001. Not if they want to achieve their profit goals. Not if
they want to stay competitive. Not if they want to remain in
business.

All of which makes the annual ritual of budgeting more critical
an act than ever right now.

Despite its importance, though, budgeting somehow remains one of
the least understood and most under-utilized management tools in
the arsenal of independent kitchen and bath retailers.

Vlachos and Darlington who will lead the Kitchen & Bath
Design News/NKBA’s highly-acclaimed “Managing for Profit” seminar
series again in 2001 say it’s literally staggering how many kitchen
and bath dealers function without the benefit of a formal budget.
In fact, only about one in every 10 dealers actually work with any
type of budget at all, they contend. Even fewer, they note, find
the time to actively review, and tweak, their budget on a regular
basis.

The reason, by now, seems resoundingly clear: Many dealers,
quite frankly, are simply uncomfortable with the numbers side of
the business, and tend to shy away from it. Many, in truth, have
been drawn to the industry from the design or construction sides of
the business, and either don’t really like, or don’t have a flair
for, finances. Others feel it’s more creatively challenging
glamorous, even to surround themselves with matters related to
design, marketing or sales. In contrast, issues like balance
sheets, P&L statements and cash flow either put many dealers to
sleep, or cause them to break out in a cold sweat.

This, of course, is very unfortunate in light of the fact that
an accurate, focused and detailed budget is a key strategic tool.
Stated simply, budgets enable you to predict cash flow, forecast
results and allocate funds to support all strategic decisions.

Kitchen and bath dealers need to remember all this. As 2001
budgets are completed, it’s also worth remembering that:

n Budgets should be closely tied to a specific corporate
strategy, in order to be certain your company has the anticipated
revenue to support the business activities it is planning.

n While budgets may represent roadmaps, they should not be
considered straitjackets. The cement-like, annual budgets that were
once the standard can be replaced by continuous, “rolling”
short-term forecasts that be updated as frequently as circumstances
needed.

n Technology is not a substitute for good, old-fashioned “horse
sense” about the way your business works. While it’s true that
software can help automate and improve the budgeting process, even
the best new software is blind to organizational and operational
strengths and weaknesses that only top management can identify and
address.

n Budgets, goals and strategies need to be effectively
communicated throughout an organization. Budgets, more than ever,
are now an organization-wide activity involving more than simply
one or two people working in isolation. Key employees should be
actively involved in budgeting, and should be given enough time to
generate accurate projections.

Budgets, as Vlachos and Darlington suggest, can help business
owners get where they want to go. But, like all good maps, they’ve
got to be devised, reviewed and relied on regularly unless you’re
willing to run the risk of getting you and your business completely
lost.

Related Posts

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More