High Profit Firms Share Commonalities
The study, which was compiled by Arthur Anderson from 1996 figures, noted distinct differences among the most profitable dealers. The top 25 percent — what Arthur Anderson considers the high profit group —have several commonalities. The dealers:
- Reported solid double-digit sales growth in 1996;
- Achieved superior personnel productivity with a comparable number of employees and similar compensation levels;
- Spent less of their gross margin on fixed or overhead expenses;
- Had higher average job prices;
- Were more likely to charge design fees;
- Had similar marketing budgets to other firms, but differing tactics and
- Achieved slightly higher gross margins than other firms.
“Kitchen and bath dealers can vary tremendously in their business practices, so we don’t consider these factors to be a magic formula for every dealer’s success,” said Nora DePalma, NKBA director of marketing. “But they should certainly investigate these areas of their business, since these characteristics stood out among dealers who outperformed others in the PAR.”
The complete Performance Analysis Report (PAR) details sales performance, profit margin management, personnel productivity, operating expense control, cash flow analysis and cost drivers, as well as designer/salespeople compensation practices, installation practices, marketing activities and office automation.