Darlington On Showrooms
As I travel the United States and Canada working with wholesalers on the showroom side of their business, I am amazed how few have any formal plans on where they want to take this important side of their business. In fact, I've yet to work with anyone that has put together a well-thought-out long-range (three-year minimum) business plan for their overall business. In this highly competitive market place with all of the acquisitions and mergers happening, I just don't understand how a business can thrive (even survive) without planning for the future.
That's the bad news. The good news is I have had the pleasure of working with five different wholesalers, helping each of them write a long-term showroom business plan. All are multi-branch operations. Revenues range from $75 million to $300 million. All have been in the showroom business for a number of years. None had any continuity in how these showrooms operated. From a design and layout point of view all were different. Very few were retail-friendly. Some tried to “protect” the plumber, others sold to anyone. All sold traditional plumbing wholesaler products - with very little diversification. None was treated as a profit center. All were part of a branch operation, with the local branch manager acting as the person in charge. Compensation programs were all over the place - but with showroom sales consultants grossly underpaid. Conversely, sales per salesperson were low and margins across the board were terrible. Now I did say there was good news, right? Yes, there is!
I have been working with each of these five wholesalers for two or more years. Each now has a written, well-thought-out business plan for the showroom part of their business. I'd like to share in broad, general terms how this was accomplished.
First and foremost, the top management has to recognize a need for formal planning. They have to believe that showrooms are, or can be, an important part of their business today and in the future. They have to be willing to dedicate the time, energy and resources into growing this potentially lucrative piece of their business.
Next, top management needs to delegate the overall management of showrooms to an experienced, hard-working, creative, open-minded person.
This is followed by writing a comprehensive showroom business plan. It identifies where you are, where you want to go and how you're going to get there. The “director of showroom operations” can't do this alone. He or she may need the help of an outside consultant, books on how to write a business plan and will want to form a small committee to help put the entire program together. This “committee” might be made up of the company president/CEO, director of showrooms, one or two branch managers (those that understand and like showrooms) and one or two showroom managers/consultants. To learn more on how to formulate a business plan and what it should include, see my articles in SUPPLY HOUSE TIMES: January 2004 page 168 “Business Basics For Showrooms And Wholesalers” and December 2003 page 90 “Plan Now For 2004.”
You will need a format to follow and a facilitator (this is the role I played with the companies). You lock yourselves up in a room for at least two full days and you brainstorm like crazy. You cover every aspect of what goes into running a successful showroom. Someone keeps notes. Flip chart pages are filled and taped to the walls (kept in order of topics). Coffee, water and sodas are consumed. Boxed lunches are brought in. And in the end, a plan is developed. A spreadsheet is made that lists everything decided upon. This spreadsheet might include these items:
- Action Item
- Person(s) Responsible
- Target Start Date
- Target Completion Date
- Estimated Budget
- Additional Comments/Information
This “Action List” spreadsheet is broken out by year one, year two, year three and beyond. All items are prioritized.
Once the committee has developed the business plan format and action list, it needs to be shared with everyone involved. Top management has to be part of this. Once the plan has been communicated and you have “buy in” from the whole team, then the plan is implemented - step by step.
Following are just a few of the things that have been included in the plans that I've helped develop:
- Financial forecasts for the showroom business. This includes sales, gross profit, expenses and operating profits - by location. (Each showroom is treated as a profit center.)
- Branding for the showroom. In several cases this included changing the name, logo, colors, etc., for the showroom. The goal was to make the company/showroom the brand as opposed to the manufacturers they represented.
- A gross profit margin improvement program. The goal here was to give the sales consultants the tools and to teach them how to make more profit on the sales they make. (Note: I have seen all five of the wholesalers I worked with on business plans grow their margins by four points or more - two of them by six points or more.)
- Develop a marketing plan. A well-thought-out marketing plan for the showrooms including advertising, promotions and public relations. This includes what and who to use, how much to spend and a timetable for the whole program.
- Develop a showroom layout and design. This is a design(s) that all the showrooms would follow, using their own boxes and boards for the display product. It includes consistent lighting, floor covering, signage, colors, etc. The only thing that would vary would be the size of the showroom - and this would be determined by the demographics of the individual marketplace. Every showroom would be consistent in appearance. This is done once. Then you use a “cookie cutter” approach when remodeling or building new. In some cases the showroom may be remote from the wholesale operation.
- Product diversification. Analyzing each and every vendor is a priority. Then a “preferred vendor list” is created. (Three of the wholesalers I worked with appointed a vendor selection committee. Their job was to analyze current vendors, select new vendors/products that would help grow the revenues and margins and that would help form stronger vendor partnerships.) By being more uniform in the products shown and sold you grow relationships and purchasing power with your vendors. Buying better leads to improved margins also.
- Chart and plan people needs. By having formal financial projections you can plan your people needs in advance rather than having to hire and train “on the fly.”
- Develop a comprehensive training program. This includes sales training as well as product training and systems and procedures training. (On-the-job training just doesn't get it.)
- Compensation programs. All compensation programs should be reviewed. This would include establishing sales and margin goals - and incorporating incentives into the overall program. The goal here is to increase productivity (sales and gross profit percentage/dollars) and to allow sales consultants to make more money.
- Best Practices list. This is a long list of how the showroom will be operated to make it the very best it can be. (See my previous articles in SUPPLY HOUSE TIMES: July 2003 page 124 “Back To The Basics” and March 2001 page 42 “Beating The Big-Box Stores.”)
This is only a small list of some of the items you might consider for the showroom business plan. It should include everything you can think of (small and large) that will make this important end of your business better. Each company's business plan will be different based on size, location, demographics, products, etc.
If you would like more information or help in this area, please e-mail or call and I'd be happy to give you some direction.