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Get Financially Fit

How to Get Financially Fit and Boost Gross Profit Margins

“Motivation is the catalyzing ingredient for every successful innovation.”

—Clayton Christensen


Independent kitchen and bath dealers can make significant strides in profitability through a collaborative effort with other firms. Too many kitchen and bath firm owners adhere too strongly to the notion of being “independent,” which causes them to miss out on learning from the success and failure of other dealers.

SEN has observed that the prime reason why so many kitchen and bath dealers fail to reach their financial objectives is that they haven’t developed their industry knowledge as thoroughly as needed for enduring success. This misstep can be avoided by comparing designs with sales designers from other firms outside your market.

Many owners choose to stay away from comparing their designs and financials with out-of-market firms. Typical reasoning behind this avoidance comes from owners’ fear of being bested by “the competition.” Owners may be frustrated or envious of firms with higher gross profit margins and more efficient staff – but that’s a great reason to learn what those firms are doing right.

Fear of failure prevents many independent kitchen and bath firm owners from seeing their businesses become as profitable as they can be.

Financial savviness delivers better results

Many independent kitchen and bath firm owners appear to be more successful than they are. They have an attractive showroom, an excellent reputation, an expensive car, and a beautiful home. These owners are successful despite not knowing what they don’t know – they’re not making nearly as much profit from their firm as they could be if they compared their financial statements and metrics with other owners.

The fact is that many independent kitchens and bath firm owners are not confident that their returns are as strong as they would like them to be – so they ignore their financial statements. Instead of knowing the numbers, many owners rely on the bad habits that allow them to appear financially fit.

  • They make critical decisions based on what’s in their checking account
  • They utilize cash accounting – a method notorious for inflating actual financial position

Simply understanding how to interpret a financial statement can reset a firm not reaching its full potential on the right track. Once owners have a firm grasp of their books, they can keep their operations healthy by fine-tuning them through peer-to-peer performance reviews.

There are four main types of financial statements:

  1. Balance sheets
  2. Income statements
  3. Cash flow statements
  4. Statements of shareholders’ equity

Gain back some overhead dollars by learning where you might be spending too much money in your operations. For example, what percentage of your income is spent on salary, rent, insurance, retirement benefits, and advertising in truck expenses? Comparing expenses with other owners can give you tips on where you can cut costs without sacrificing service.

Improve your business model

Many owners believe adding more sales designers will increase their firm’s net profit, but this is not always the case. Adding designers to your team is one way to see your gross profit margins decline. When a firm takes on too many sales designers – owners often find themselves in the unwanted manager role, which they may not be prepared to take on.

SEN’s dealer roundtables are the independent dealer’s leading source for peer review in the kitchen and bath industry. At roundtables, owners hear firsthand from other dealers where their firm is lagging so they can make the appropriate tweaks to better their bottom line. If prospects perceive your firm as a superior value to that of your competition, they will flock to your showrooms, pay more for their projects, and be happier in the process.

Improve your team’s productivity

Kitchen and bath dealers can earn up to 50% more gross profit dollars per team member. It may sound far-fetched, but it can be done if you make certain adjustments to your business.

  • Hire only the best salespeople so your whole team is selling at higher profit margins
  • Organize your staff so they are operating at the highest level of efficiency
  • Use subcontractors instead of payroll installers
  • Streamline your operations by using a centralized selling system
  • Offer incentive systems based on gross profit earnings
  • Hold in-house training classes for your team. We recommend monthly classes for optimal growth

The need for more excellent business knowledge and improved financial performance outweighs the humbling effect others’ success may have on your ego. Financial comparisons will kindle your competitive spirit so your firm can reach new heights of performance. Compare your performance with other owners – the opportunity for advancement is too great not to do it.


                                                                                                              —SEN Leadership Team


Master strategic planning, selling more into each job, leveraging technology, Good-Better-Best selling, and other intelligent implementations at one of SEN University’s valued online business courses. Or contact us to attend our in-person schools.