Garage door industry magazine for garage door dealers, garage door manufacturers, garage door distributors, garage door installers, loading docks, garage door operators and openers, gates, and tools for the door industry.
Issue link: https://idoi.epubxp.com/i/216705
SALES&MARKETING; by Dan Apple The Apple Group, LLC Five Thing$ to Boo$t PART Proft$ Overnight TWO cost. So if we want to work at reducing cost of sales the largAs discussed in my article in the last issue of est possible impact is with material and labor cost. ID&OI; magazine, Volume 46, Issue 5, page 34, there are fve ways to increase your profts nearly Material Cost Big Ticket Items – What makes up our material cost? overnight. Let's review. 1. Raise Your Prices 2. Reduce Your Cost of Sales 3. Change Your Product Mix 4. Increase Sales Quotas 5. Eliminate Crappy Customers In the last issue we considered #1 on my list, raising your prices. I hope you did that as soon as you fnished reading the article! Now let's consider #2 on the list, reducing your cost do sales. While we tend to frst focus on new doors and openers, when we think about it there's a lot more to consider. There are the parts and accessories needed to install garage doors such as trim, angle iron, low voltage wire, fasteners, etc. Stocking parts for performing garage door service is also a big area of cost and can be a challenge to manage. While all of these should be monitored regularly, the area that can present the quickest and largest reduction of material cost is new doors and openers since they make up the bulk of a dealer's purchases. Before we discuss how, we frst need to clearly defne cost of sales. Since a company's gross proft margin is the single largest infuence on the bottom line, it's critically important to guide and control it's cost of sales. Typically for garage door dealerships, cost of sales is the material cost, tax, freight, direct and/or sub-labor plus any other costs directly related to performing the work such as equipment rental. Here's an example. Amount Sales (Revenue) % of Sales $1,000,000 100.0% $450,000 45.0% Tax $50,000 5.0% Freight $50,000 5.0% $120,000 12.0% $10,500 1.5% Total Cost of Sales $680,500 68.5% Gross Proft Margin $319,500 32.0% Material Cost Direct / Sub Labor Other Direct Job Costs Figure A There are only two ways to increase gross proft margin. One way is to increase sales and the other is to decrease cost of sales. From the example above there are fve components that make up cost of sales. By far the largest of these, which you have the most direct control over, are material and direct labor costs. Freight is also an area to consider but does not have as much impact. Tax is non-negotiable and Other Direct Job Costs in our example is a small part of the overall 36 International Door & Operator Industry™ Do Your Homework – My manufacturer friends in the industry will not like this next part. However you owe it to your company's proftability to analyze what your major suppliers are charging you for the products you sell. That will require you to spend a fair amount of time doing product cost research in order to see how your costs compare. Just as your local area has a market price for selling your products, it also has a market cost for purchasing. To do this you will need to entertain price quotes from competing manufacturers. I know this is not popular with your incumbent suppliers, but there's really no other way to gather viable data. Continued on page 39