DARLINGTON ON SHOWROOMS: Darlington's Top 10
If David Letterman can do it, so can I! Following is my list of Top 10 items (in reverse order, just like Dave’s list) that I believe a company has to do to ensure maximum success of its showroom.
I run around all over the United States and Canada every year expressing each one of these points. There’s a lot involved in each one. I won’t have the space to go into huge detail, but you’ll get the idea. My experience from visiting and working with dozens of wholesalers and independents that operate showrooms is that they get a pretty poor rating in many of these areas. That’s the bad news. The good news is, there’s a lot of room for improvement. The big question is, are you willing to do what you have to do to start getting higher marks in how you operate your showrooms? Here is more good news: By doing a good job in each of these areas, you will improve your return on investment, make more money, and have happier customers and employees. Wow! That’s a big incentive to take this list seriously.
Are you ready? Here we go with Darlington’s Top 10:
10. Top management learns retail and really gets involved with the showroom.Like so many things, it starts at the top. Owners and managers can’t just give the okay to build out a showroom. They have to make an effort to learn this all-new business. Whether you sell to plumbers only or have opened your doors to all, the plain and simple fact is a showroom operation is more retail than it is wholesale. Homeowners are doing the majority of the product selections. Interior designers, builders and architects use showrooms. Therefore, your showrooms have to look, feel and act like retail businesses. Yes, that means dress professionally, have customer-friendly hours, have marketing programs directed to all of the above and much more. So, all you business bosses out there, if you really want your showroom to be the very best it can be, then do what you have to do in order to learn this part of the business. If you’re not sure where and how to do this, e-mail me and I’ll give you some guidelines.
9. Develop strong partnerships with key vendors.Work hard to become important to your suppliers. This means featuring their products in the showroom. It means learning their products inside and out. Product knowledge is more important than ever before. Develop strong working relationships with the local rep and key factory people. Spend the necessary money marketing your showroom and key vendor products so potential clients will come through the showroom doors. Pay your bills on time. Keep display products current and up-to-date. Don’t over-saturate in terms of brands carried - be important to a few, as opposed to less important to many. Be a great communicator on the good, the bad and the in-between.
8. Have a well-thought-out, detailed, written marketing plan.Know who your target audience is. Develop an itemized plan on how you will advertise, promote and do public relations to attract these potential clients to your showroom. Establish an annual budget for your total marketing program. I suggest 5% of total showroom sales. You should recoup 1-1/2 to 2% in co-op dollars. Develop a diverse and comprehensive package of products and services to offer your prospects. Don’t just show and sell the traditional wholesaler products; step outside the box. Have a great Web site. Be creative in this very important area. Get outside professional help if necessary.
7. Teach selling skills.This is part of marketing, but I wanted to break it out and make it one of the Top 10. Very few people - wholesalers or manufacturers - do any selling skills training. We all know that nothing happens until a sale is made. So this being the case, why don’t you develop a first class sales skills training program? Selling skills include how to meet and greet clients, how to qualify them, how to present products and services, how to “sell” value, how to address concerns and objections and make them go away, how to close the sale and how to do things after the sale that will keep them saying great things about you. There are a number of great books, videos, listening tapes and seminars on the subject (including an 8-hour showroom selling skills workshop that I do for NKBA and for individual companies). Make teaching these selling skills a priority.
6a. Set a minimum goal of earning a 40% gross profit margin.What’s that, you say? Impossible? Certainly a lot depends on what percent of your showroom sales are to the plumbing trades. But even if 100% of the sales are to the plumbers, you have to make 33 to 35 points in order to realize the return on investment that you have to make in order to justify the effort. A good diversification of products and customers is what makes the 40% goal achievable. There are a number of wholesalers that are enjoying 35 to 40% gross profit margins and more. If independent decorative plumbing and hardware showrooms - who can’t buy a lot of products direct from the manufacturer - can meet and exceed the 40% goal, then you certainly should be able to.
6b. Keep expenses at 27% or less.The difference between gross profit margin and expenses is what determines the bottom line. And yes, the expense portion of operating a showroom is more than the wholesale side. Smaller sales, longer time to make a sale, build out of displays, lots of products in the displays, lots of lighting, a large percentage of special orders, the aforementioned marketing budget, heating and air, etc., - all add up to showrooms being more expensive to operate. But just like the wholesale side, you can do a good job managing all of these expenses. The smaller the margin and the higher the expenses, the less there is to show on the all-important bottom line. No surprise there.
5. Be strong in your human resource management.People are your most important asset. Yes, even more important than inventories and receivables. So, having written job descriptions, doing once- or twice-a-year job performance evaluations, having a good compensation strategy and doing the following five things the best will help you be strong in this very important area. Hire the best, train the best, communicate the best, motivate the best and compensate the best. Too often wholesalers don’t incorporate these five “bests” with their showroom people. It’s easy to change and the results are phenomenal.
4. Establish an annual budget and goals.Two months before the end of your fiscal year you should start working on next year’s budget. Pull out the last two or three years of financial reports. Compare these to the current year. Then get out a crystal ball to study next year’s projections. What is happening with the economy locally and nationally? Will housing starts and remodeling be up or down? Talk to your own sales force and get their input. Talk to your vendor partners. When you’ve assimilated as much info as possible, then build next year’s budget. Set sales and gross profit goals for salespeople. And then use this as your road map for the next 12 months. Your budget will tell you when you can add the next team member, when you can change out displays, when you can give pay increases, and so much more.
3. Treat showrooms as profit centers.Yes, break out the financial results (sales, gross profit dollars and expenses) of your showrooms. Don’t mix it in with the wholesale business. You’ve spent a lot of money building out your showroom(s) and staffing them. Don’t you want to know monthly whether they are making or losing money? Sure you do. So develop a showroom profit and loss statement. Yes, you may have to interpolate some of the expenses (rent, insurance, utilities, etc.), but this is pretty easy. Generate the P&L monthly. It’s your report card on how you’re doing. Study these statements and react to them. Eliminate surprises.
2. Have a written, comprehensive 3-year showroom business plan.This will show you where you are today, tell you where you want to go, and spell out exactly how you are going to get there. It’s your road map for the future. Stop flying by the seat of your pants and get professional. Do everything you possibly can to ensure the long-term success of your showroom business. Make showrooms an integral and important part of your overall business. Business plans are not hard to put together. They take a little time and a bit of futuristic thinking, but the end results are very much worth the effort. I have helped a number of wholesalers (large and small) write business plans and the results have been fantastic. They allow you to take well-planned steps toward your goal as opposed to stumbling around without a goal on paper.
1. Make money with your showroom.(This doesn’t need any further explanation!)
Certainly there are a number of other things you should do to help make your showroom business the very best it can be, but this list points out what I believe are the most important action items that you should focus on. If you are not sure how to attack any one of these, call or e-mail and I’d be pleased to help point the way. Good luck!