“I could not endorse this program more and will look forward to personally promoting SEN events in the future.”
Design talent is not a guarantee for profitability, growth, or success. Success in the kitchen and bath industry is grounded in knowing a business’s numbers and understanding that knowing the competition’s value offers a unique perspective that assists owners in identifying their own company’s value.
Typically, active firm owners do what they’re good at and avoid learning new skills to apply in their enterprise. Education is objectively good, and everyone loves learning. However, the time investment is a good reason kitchen and bath owners eschew dedicated learning: they don’t want to spend time away from their business.
Owners who apply skills without adapting new technologies and better practices that can revolutionize their operations are preventing their firms from earning more significant profits. The result of inadaptability will stunt a firm’s growth over the long term, leading it to stagnate as a lower-earning enterprise.
The SEN Design Group created its 4-Day Executive Business School to deliver a comprehensive education to independent kitchen and bath dealers to help them maximize their operations quickly.
The 4-Day Executive Business School is an industry-specific education in building an endurably profitable enterprise that offers teaching in finance, management, marketing, team building, and sales, reaching the needs of novice entrepreneurs and successful veterans’ needs. The payback from time and money spent far exceeds the cost of this extraordinary investment.
The essence of leadership
There’s literally no education of this type—and this specific—in the industry that I am aware of.
—Vince Hodshire, CEO,
Exclusive Cabinet Agents,
Chicago, Illinois
When we talk about business savvy, we’re talking about experience. The deeper the esteem an owner has for their knowledge base, the less seeking they will be of fresh ideas.
Naturally, business owners want to have as broad a perspective as possible to make appropriate decisions for their enterprise. Listening, understanding, discernment, humility, and right action are the cornerstones of great leadership. Outstanding leadership also involves hiring specialists for a task, admitting one’s mistakes, and applying new teachings. Brilliant leaders don’t purport to be familiar with everything, so they do not have to be the smartest person in the room. For their enterprises to be phenomenally successful in the long term, outstanding leaders will often look to those more knowledgeable than themselves to find an answer.
The SEN 4-Day Executive Business School sharpens kitchen and bath business owners’ knowledge bank, strengthens good habits, and enriches the experience they pull out of running their business.
SEN believes in sharing its vision with kitchen and bath firm owners and learning their visions since everyone working in the kitchen and bath industry today has the potential to contribute excellence to it.
This paper will dive deeply into the business school.
The 4-Day Executive Business School is the vision of SEN founder Ken Peterson, CKD, and several colleagues throughout the past five decades. It is not SEN alone who carries the torch but all of us pushing the industry forward. SEN School solidifies kitchen and bath designer values and unites attendees through a shared vision and goal.
Measuring the success of a business: knowing the numbers
SEN has benefited me in so many ways—specifically, the exercise of creating a three-year budget and profit plan. That exercise enabled me to plan revenue, marketing, staffing, and personal growth. This process made it possible to bring the events of the future into the present and has empowered me to get a real handle on moving to the next level.
—Michael Watts,
Bel Air Construction, INC.,
Forest Hill, MD
The top priority for a business owner is knowing the numbers their business is doing.
Knowing the number is the principal freedom that enables a business to grow into a healthy enterprise of long-sustained success.
This is why the 4-Day Executive Business School focuses on finance and the most critical decisions to maximize an owner’s return.
Adopting a three-year budget
SEN Senior VP and SEN School instructor Dan Luck teaches how first to understand and then leverage financial statements into maps for guiding owners to sustain success for their operations in the long run.
In SEN School, Luck demonstrates how it’s possible to overcome the trepidation of taking an honest look at an operation’s numbers and why knowing the numbers is one thing kitchen and bath business owners must have an expert handle on to ensure the success of their enterprise.
Another critical financial focus is learning the proper way to budget your business.
- Project revenue
- Skip over gross profit and start detailing Sales Expenses line item by line item
- Do the same for Administrative Expenses
- Project Other Income and Expenses
- Select the desired percentage of net profit for the company
- Reverse engineer the gross profit in dollars to finance the overhead and net profit
SEN recommends developing budgets three years out for greater visibility and maneuverability.
One key derivative of this business process is creating the correct price formula for your business. Doing this will ensure you reach your desired net profit.
Four key indicators for measuring performance
Kitchen and bath remodeling is such a complex industry that it takes a great deal of balancing good habits and practices to keep firms leveraging through the rises and afloat through the declines of the economy. It’s after owners master financial matters that a kitchen and bath firm can be measured for what it is genuinely worth instead of what it appears superficially to be.
First indicator: accrual accounting
Accrual accounting recognizes income when earned in full – upon a project’s substantial completion. It’s more accurate than cash accounting since product and labor costs will have been booked by then, delivering an actual gross profit percentage. Cash accounting books revenue upon receipt of the deposit check before any project costs have been incurred. It grossly inflates income, gross profit, and net profit.
Second indicator: current ratio
The current ratio is a way of measuring a company’s ability to pay its bills on time.
A healthy current ratio is 2 to 1. Banks want to see a 2 to 1 ratio, meaning a business can pay back its current bills and credit line within a given year.
Current Assets (cash, inventory, receivables) 2
……………………………………………………………..
Current Liabilities (invoices due: credit line) 1
Third indicator: debt to equity ratio
Debt to equity refers to the amount of debt a company has compared to its equity – or net worth. Here, again, bankers want to see a 2 to 1 ratio. Two parts borrowed money for one part of the company’s equity, representing the profits left in a business. Suppose the ratio of borrowed money exceeds 2 to 1. In that case, banks are unlikely to grant additional loans unless the owner can prove that the company’s retained earnings are parked in a personal bank account or liquid investment portfolio.
Fourth indicator: retained earnings
The dollar amount of retained earnings that show up as net worth on a balance sheet is by far the most important indicator out of the four. Retained earnings are proof positive that a business is profitable or failing.
Foundational success: building the right team the first time around
Talent wins games, but teamwork and intelligence win championships.
—Michael Jordan
It’s people first, technology second.
Kitchen and bath firms succeed from exceptional teamwork. The more effective a team is, the more profitable a business can be. Technology will streamline your business to provide greater efficiency and service – your team will dictate and measure the size of your success.
What results is your business seeing from your team’s efforts?
Team members are more likely to achieve goals when there is an incentive to do so. The incentive is partly built on team pride and carried through to their maximum potential by designated challenges.
Ability, compatibility, communication, and orientation are key to a healthy, long-lasting, highly productive team.
- Compatibility – How well does your team work together?
- Communication – How clearly and quickly is your team responding to each other?
- Orientation – Does your team have a goal that they want to achieve?
To build a great team, firms need to hire smart. Owners may want to audit their hiring process and fine-tune their approach to interviewing candidates.
- How do you make hiring decisions?
- What is most essential for you in a candidate?
- What do you envision your team to achieve?
- How do you translate your core values to applicants who might not be familiar with them specifically but show qualities of those values?
Make a note of everything you want to see in a new hire for each position you have, including your own. This way, every position in your firm is expressed as an idea in your own words. From these records, you can measure your candidates for your impressions of them and how they stack up against your ideal qualities. This way, your ideal personnel is captured in words, and you can measure your candidates by your impressions of them and how they stack up against your ideal qualities.
What businesses need from their employees stems from general behavioral qualities. Love, trust, speed, personal development: what’s important for you to see in candidates to fulfill a specific role in your business? Do your candidates’ promising qualities match up with universally esteemed qualities?
#1 Love – People who love their work are dedicated to doing it well.
#2 Trust – You need to trust them. When you hire someone, you’re investing in your company’s future.
#3 Speed – How fast are they in completing assignments? When everything is said and done, fast producers translate to higher profit potential.
#4 Personal Development – Are they committed to learning? Their occupation will continuously challenge people who love what they do and love learning.
Assessing the abilities of new hires with DiSC assessments
DiSC assessments identify learning styles and illustrate how individuals interact with the world through graphs and percentages. They help determine whom to hire and where to place them in an organization. Other personality assessments may be helpful in hiring the right people. Introduced in 1940, the DiSC assessment measures human attributes through the lenses of dominant, influential, steady, and conscientious personality types.
Attendees of the Executive Business School take a free DiSC assessment before starting the school. Instructor Dan Luck will walk the group through their results during the course. The 60-page reports are a marvel of information for people to absorb about themselves and help them become more effective in their interactions with others.
Each of the behavioral styles is the characteristic of a potential leader, with strengths and weaknesses.
- Dominant – D styles – are extroverted people who love to express their opinions
- Influencers – I styles – are personal and trusting idea people
- Steadiness – S styles – are amiable, patient people who know how to keep the peace and avoid conflict
- Conscientious – C styles – are conscientious, detail-oriented, and precise
DiSC assessments will help owners to make the right hire, know where to place new hires, and identify when any shifts in post need to be made for existing employees.
Motivators and driving forces – debriefing employees on their DiSC results
In SEN School, the instructor will discuss the meaning of the test results. SEN offers one-on-one consultation with them in a deep dive into all the metrics.
In addition to having a deeper understanding of your behavioral style and thus, how you are most productive, owners will have the opportunity in the class to identify and discuss using motivators to effectively communicate with and get the highest performance out of their employees.
Streamlined service is superior service
The kitchen and bath industry is ripe for disruption. Technology applied to all aspects of our industry is my number one disrupting trend for 2022 and beyond. Technology will attract talented young people to enter our industry and build their careers, leveraging these powerful tools, which is what our industry needs for long-term growth and sustainability.
—Sarah Reep, CMKBD, Industry Consultant
People bring uniqueness to a buying experience, but their sales service should never surprise anyone inquiring or doing business with your firm. Whether they are a prospect getting their first impression or a repeat customer, the quality of service should always be streamlined for efficiency, speed, and accuracy.
The SEN Design Group has acknowledged exemplary business practices used by firms nationwide for decades. These business practices are what this white paper addresses and what is taught in SEN Executive Business School.
Once the financial fundamentals are understood, implemented, and regularly practiced, the critical issue for kitchen and bath firm owners is streamlining a business.
Making 10%+ net profits (after market-rate salaries for owners and team members) in the kitchen and bath industry is centralizing your business’s expenses and streamlining it with economies of scale.
In the four-day SEN Executive Business School, attendees learn how to charge 40% more and earn it with every job they do.
This unprecedented notion of charging more and being perceived as a better value is time-tested. It may sound unrealistic, but differentiating from your competition upwards and cost is not only a viable opportunity.
It’s a straightforward system with big payoffs.
- Engage prospects with an interactive sales process built around their needs that your entire staff can master quickly
- Use DesignAlign™ to foster relationships with clients and quickly determine an accurate budget with them
- Discover why streamlining your sales process will allow you to scale your operations with multiple satellite studios much more quickly than without using one
Incentives to inspire healthy competition and more significant returns
Once a kitchen and bath business has its personnel and selling system in place, it is helpful to use an incentives program to build rapport within your team. If you have not already implemented an incentives program, discover how using one can boost your sales by influencing client spending.
- Increase your sales and gross profit – achieve the common goal of earning bigger profits by setting quarterly sales figures to reach. Boost sales designers’ morale and enliven customers’
- Create stronger client relationships – prospects notice when design teams work harmoniously together. Pleasurable buying experiences are marked by consistency, speed, and accuracy—capped by engagement with a seasoned, synergized, and energized team of experts.
- Motivate sales – An incentive program with an attractive goal will inspire healthy competition among your team and foster sales designer-prospect relationships, as well as better individual and firm-wide performance.
The critical importance of sales forecasting & management
In developing a company sales plan, managing change by the percentages, creating individual sales plans per designer, and measuring a salesperson’s effectiveness during monthly evaluations are necessary.
It is possible to scale your business in a few years rather than decades. Timing when to expand from a showroom business model to a showroom satellite model is crucial for kitchen and bath owners.
Traditional showrooms and the studio model share the kitchen and bath market pretty evenly. While showroom models manned by a fleet of sales designers typically do higher volume business when the economy is good, the studio model offers greater flexibility. A studio owner who closes virtually all the sales can more quickly pull back on overhead when the economy goes south, lessening the brunt of a recession, and have an easier time expanding their business when the market roars back.
Five years or so before retirement, it would be smart for the studio business owner to shift to the “showroom” business model. Elevate those design assistants who have been incubating in your operation to full-fledged professional sales designers who handle all the leads from the onset. Elevate yourself to a general manager role to guide and direct these new sales designers. Add design assistants to support them.
Your objective is to have a strong, experienced sales team following the same sales process that consistently delivers superior customer experience. A short term result may be that you might not make as much personal income, but you will more than make up for it when you cash out.
Critical management tools to steer the ship
A budget doesn’t limit your freedom; it gives you freedom.
—Rachel Cruze, Financial specialist and author
What is your firm’s breakeven point?
We all want to count our sales as another pile of loot to stash in the castle. And while job after job each quarter proves that homeowners want to do business, multiple sales for your firm do not accurately project how much spending cash you have. The amount of spending cash is identifiable after calculating the “burden rate” in your cost of sales.
Considering indirect labor expenses such as project manager supervision, how do you correctly job cost before paying your sales designers their percentage share of the gross profit? The answer is creating a burden rate – based on a comprehensive annual company budget that covers indirect labor expenses as a calculated percentage of total labor expenses.
Knowing what your firm needs to make for every job is crucial in helping to stratify your spending.
Your break-even point is found by identifying your variable and fixed expenses, and when you stack them against each other, you have a company’s break-even point.
Indirect labor and production expenses include a project manager’s salary, delivery truck operations, warehouse rental space, et cetera. Owners who do not do the proper job costing end up overpaying their sales designers and under-collecting the firm’s overhead.
The kitchen and bath dealers’ most significant variable expense is always the cost of sales. Materials used for projects, labor – both payroll and subcontracted – and transportation are all part of your cost of sales. Other crucial variable expenses include sales commission, payroll taxes, advertising, marketing tools, travel, and entertainment.
Forecast your cash flow three months out
A cash flow forecast is your lifeline to soaring in high times and staying afloat in tough times – always forecast for three months out. Three-month forecasting is a byproduct of your three-year budget.
Think of this budget as a magnifying glass that allows you to see your firm’s activity in a contained period. These flow forecasts might be updated monthly, weekly, or even daily, depending on how challenging the economy is and how your business is doing.
Your accounts payable aging, balance sheet, income statement, and so forth all factor into your cash flow forecast. Hence, when they change, your cash flow forecast should be updated.
Taking your company from good to great
Greatness is not primarily a function of circumstance. It’s first and foremost, a matter of conscious choice and of discipline.
—Jim Collins, researcher, professor, and author
If you walk a couple blocks down a commercial street, you may notice businesses that specialize in doing one thing – and do it brilliantly. In New York City, most neighborhoods have a pizza shop that is more popular than the rest. In Paris, one can find a crepes stand that enjoys a monopoly of the tourist business during the day and the bar crowd at night because their crapes are fantastic. People flock to these businesses because they do one thing exceptionally well.
Kitchen and bath firms of unprecedented success in their local market are likely to be doing one thing brilliantly. They may showcase stellar products that sell themselves and make working with them a breeze. No doubt, there are many aspects of their business to praise. However, their greatness likely stems from that one thing they do brilliantly.
Customer service is the one thing to get right every time. Great service turns prospects into clients and clients into repeated clients and referrals. Great service is the public face of the driving force that provides the cushion for owners to scale their businesses. (Mastering the numbers is the private face).
Great companies have great leaders, and they invest in people and products they love and prosper richly because of it.
- What can your firm be the best at delivering to customers?
- What is driving your business to earn profit?
When the answers to these questions are intrinsically related, you have the prime ingredient for greatness.
Whether you’re an industry vet or new to the game, the 4-Day SEN Executive Business School has a lot of wisdom to share with you. Dan Luck teaches new, good, and better businesses to achieve higher success. After all, the SEN Executive Business School was born out of decades of successful owner-operated enterprises that blazed a path in the kitchen and bath industry before we did!
