By consulting and giving training workshops Igetto see firsthand what’s going on out there in the industry.  A lot of what I’m seeing excites and pleases me, but there still is a lot that causes me quite a bit of concern.

The things that put a smile on my face are:

·         Much nicer showrooms.

·         A greater variety of products and services.

·         Much more customer-friendly showroom locations and hours.

·         Gross profit margins inching up (moving out of the 20s into the 30s).

·         Better compensation packages and training which equates to better people.

·         Showrooms being treated as a separate business and profit center.

·         Top management starting to learn and understand and even like the “retail” business.

·         More and better use of the many great technological tools available.

·         Understanding and responding to the fact homeowners and designers really are the decision-makers, not the plumbers.

In fact, many of you are getting pretty fancy in how you operate your showrooms — and I love it!  But, isn’t there always a “but?” Too many of you are still ignoring the very basics of what you have to do to become truly successful. So let’s talk about several things that in my opinion you should and must do if you want to maximize your ROI and put yourself in a position to “own” your own marketplace.

I learned very early you have to learn, practice and master the basics before you can start getting fancy.

Here are some of the very important basics you must incorporate into your showroom business if you want to become the very best you can be:

Develop a detailed, written 3-5-year showroom business plan:  

This is your road map into the future. It explains in detail who you are today, who you want to become in the future and most importantly how you will get there. Your business plan should include: the overall vision of the business; your goals and objectives; an overview of the industry; market information and analysis; a comprehensive description of the products and services you will offer; a detailed marketing plan with strategies; an overview of your competition; a detailed financial plan and information including projected income; and overview of key personnel.

Develop and write a detailed vision and mission for the showroom:   

This summarizes the core purpose of why the showroom exists. Without a clear vision, the showroom will wander from opportunity to opportunity never reaching its true potential.  You need a vision and a mission statement.

Well-done showroom financial statements:  

Too many of you still don’t do separate showroom financial statements. Sales and expenses get mixed into the wholesale numbers. If you don’t keep a separate set of financials, how will you ever know if the showroom makes or loses money? You should create very well-done, all-inclusive profit-and-loss statements, balance sheets and even a cash-flow statement. Without these you will never know whether you are earning the ROI you need.

An annual showroom budget:  

The budget is built on realistic forecasts for the coming period and it demands owners and managers have a thorough understanding of the profit blueprint of the showroom and the financial effect of profit-making activities. An annual budget is an integrated plan of action, not simply a few trend lines on a financial chart. Your annual budget should be created on a 12-month spreadsheet and be as detailed as possible. Because it involves a certain amount of “crystal-balling,” it should not be cast in concrete. It can be, and should be, adjusted as the year progresses. Use historic data to help build your base. Today’s wonderful accounting software makes this job pretty darned simple. If you don’t have a showroom budget, don’t wait until the beginning of your next fiscal year. Do one now! It is your financial road map to success.

Detailed annual marketing plan and budget:  

It is one thing to build a beautiful showroom, but it’s another thing to let your potential clients know who you are, where you are, what you do and why you do it better than anyone else. Marketing includes creating and maintaining your website, advertising and promoting the showroom and your products, as well as doing events within and outside of the showroom to draw people to you. You should budget 5% of annual showroom sales to accomplish your marketing.  You will get some of this back in coop dollars from your vendor partners. In my humble opinion most wholesalers are poor marketers, so this is a management skill that must be learned. The marketing plan lays out what you will do, when you will do it, where you will do it and how much you will spend to do it. Learning this side of the “retail” business is extremely important to your ultimate success.

Understanding profitability is more important than volume:  

Traditionally, wholesalers have been volume-driven. The more you buy, the better the discount will be. Too many wholesalers’ products are treated as “commodities” and therefore are sold at very low margins. Showroom products are not commodities. Heck, more than 50% of what you sell in the showroom is “special order.” Achieving a gross profit margin of 35% and more on showroom sales is one of the most important basics in operating a showroom. Yes, buying right is important, but selling right is even more important. The plumber should not get the same deep discounts on showroom sales they get over the counter and out the wholesale doors. The showroom costs more to operate so common sense dictates margins must be higher.  Please make earning a good GP margin a top priority. 

Written, detailed job descriptions:  

Everyone deserves to know what’s expected of them in their daily work activities.

Job performance evaluations:  

Everyone deserves to know exactly how they are performing in their jobs. Sitting down at least once a year (I like twice a year even better) and doing an in-depth evaluation of the employee’s performance will be good for both the employee and the company. It’s been documented younger employees who live in an "instant information” age will want and expect almost immediate performance feedback.

Develop a showroom training program:  

Training should start day one and never end. It should include product knowledge, selling skills, the computer, company policies, procedures and systems. I encourage a once a week, one-hour session dedicated to training. Whether you have one showroom employee or a dozen, a well-thought-out, well-executed training program will help make you better than your competitors down the street.


The five bests

If you follow the five bests with every showroom employee, you will set the foundation to be the best.

1. Hire the best.

2. Train the best.

3. Motivate the best.

4. Communicate the best.

5. Compensate the best.

I might add every one of the basics mentioned above should be done on the wholesale side as well.  Please take all this very seriously. You won’t become as successful as you should be until you master the basics. 

Good selling! 

Profitability is more important than volume.


This article was originally titled “First, master the basics” in the June 2015 print edition of Supply House Times.