International Door & Operator Industry

NOV-DEC 2015

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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Successful garage door dealers understand the importance of promoting superior productivity as a means to boost gross margin. Higher gross margin along with careful control of costs results in higher proftability, and higher proftability allows a dealer to generate more cash fow. Better cash fow allows a dealer to invest for better productivity and expansion. Productivity gains depend on a number of factors. Product mix is a big factor. Some work typically provides higher margins than other work. For example, looking at Chart #1 below, service work provides higher gross margin than does installations of residential builder jobs. However, to get maximum gross proft out of each type of work, measuring and improving productivity is paramount. First, the defnition of gross proft for this article (and for Dealer-FIT Reports) must be defned: MANAGEMENT Continued on page 60 by John Zoller & David Bowen, Zoller Consulting, Inc. V O L U M E 4 9 I S S U E 6 D E C E M B E R 2 0 1 5 59 Now that gross margin is defned, what should each type of sale generate for a typical dealer. These typical gross margins have been determined by reviewing many job tickets and fnancial statements of many, many garage door dealerships. Chart #1 below shows margin by product line with the margin components of labor and material (freight is included in material costs in this example). Chart #1 Now, we know the industry expected gross margin, and labor percentages by sales category. The question now is to convert expected labor percentages into expected Sales - Sales or Use Tax = Net Sales - Material Used (Door + Operator + Hang Iron + Trim + Fasteners, etc.) - Labor Used on Job - Labor Burden (FICA, SUTA, FUTA, Health Insurance, 401k, Vacation, etc.) - Freight on Material = Gross Margin Sale Type Expected Gross Margin % Labor % Material % Total % Residential Builder 25.0 10.0 65.0 100.0 Residential Retro 35.0 13.0 52.0 100.0 Residential Service 55.0 25.0 20.0 100.0 Commercial 26.0 17.0 57.0 100.0 Commercial Service 60.0 24.0 16.0 100.0 PRODUCTIVITY PRODUCTIVITY "Successful garage door dealers understand the importance of promoting superior productivity...to boost gross margin." MEASUREMENT MEASUREMENT

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