International Door & Operator Industry

NOV-DEC 2013

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.

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SALES&MARKETING; (continued from page 40) is the last time you reviewed what your subs are charging you? When is the last time you got other subs to quote? Equipment – If you do a lot of heavy commercial and industrial work you are most certainly in the equipment business also. Either you own and maintain it, or you rent it. Either way the costs are signifcant. If you are not budgeting for its use on a per project basis it is costing you even more. For installation work, consider establishing an hourly or daily rate and plug this into your estimate before computing the project's bid price. For repair work, here's an idea....CHARGE FOR IT! If you have to break out an aerial lift in order to repair a large overhead door, the customer should pay at least the same if he had to rent it himself. So charge accordingly whenever possible. This will instantly pump up gross margins while decreasing other direct job costs as a percentage of sales. Impact of Reducing Cost of Sales So let's say you were able to do what I am suggesting relative to reducing your cost of sales while at the same time increasing your gross proft margin. Using the previous example (Fig. A) let's assume the following. • You were able to get an overall reduction in material cost prices of 3% through better negotiating and prompt pay discounts. • By reducing your material cost, you in turn reduced your tax on it. • Since consolidating purchases you were able to reduce freight expenses by 2%. • You instituted piecework and tightened up O.T. yielding a labor reduction of 1.75%. • You began charging for equipment used for repair jobs and budgeting for it on installation work. By making these reductions to your cost of sales here's what that same fnancial snapshot might look like (see Fig. B). 42 International Door & Operator Industry™ Amount Sales (Revenue) % of Sales $1,000,000 100.0% $436,500 43.6% Tax $48,500 4.8% Freight $49,000 4.9% $117,900 11.8% $8,000 0.8% Total Cost of Sales $659,900 65.9% Gross Proft Margin $340,100 34.1% Material Cost Direct / Sub Labor Other Direct Job Costs Figure B The results shown in Fig. B are defnitely worth the effort. In our example, a dealer doing $1 million in sales dropped an additional $20,000 to the bottom line and improved his gross margin from 32% to 34%. All by effectively managing cost of sales more aggressively. Just imagine if this is done in concert with a slight price increase….a double dose to the bottom line! Summation – The title of this series of articles suggests profts can be boosted overnight. While this sounds catchy it seldom works that way with a few exceptions. The fght to constantly improve profts is an ongoing battle that can be won. But it requires you, the owner, setting policy, monitoring its compliance and constantly looking for ways to sell more at a higher price while controlling costs. Is it easy? No way. Is it worth it? Defnitely, or you would not be reading this article. My good friend and fellow contributor to this magazine, John Zoller, says "never in your business life will you ever be able to spend a whole dollar". He's telling us that while the sales number gets so much attention it's really in the percentages that we dig out our profts. Dropping a couple of points to the bottom line can make all the difference in your year. Next issue we look at #3, boosting profts by changing your product mix. Dan Apple is president of The Apple Group LLC, a consulting frm located in Bonita Springs, Florida. His focus is assisting garage door dealers with proftability and marketing. Dan served as president of Apple Door Systems in Richmond, Virginia for 33 years which grew to a statewide dealership with eight locations. He was the frst president of the Institute of Door Dealer Education and Accreditation where he was responsible for creating the industry's frst national accreditation program in 1998. Dan also served as a director of the Door & Operator Dealers Association and the International Door Association from 1994-1998. For more information, contact him at 804.640.4253 or email: danielapple@me.com or visit the website at www.AppleLLC.net.

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