YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS JIM HEILBORN JIM HEILBORN ASSOCIATES

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

JIM HEILBORN

JIM HEILBORN ASSOCIATES

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• Standard measurements • Current Ratio – Current assets/current liabilities=current ratio• Quick Ratio – (Current assets-inventory)/current liabilities=quick ratio• Gross Profit – Revenues – cost of goods= gross profit• Gross Margin – Net sales – cost of goods sold=gross margin percentage• Net Operating Expense – Gross margin – SG&A = net operating profit• Net Profit – (Net operating profit+ income) – (other expenses + taxes) =

net profit

Gross profit ratio, Pretax profit

ratio, Sales-to assets ratio, etc.

etc. All important…but............

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

THE KEY COMPONENTS

SALESADMINISTRATION

OPERATIONSFINANCE

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KNOW YOUR NUMBER 1 KEY

INDICATOR• THE RESTAURANT

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

LEADING INDICATORS VS.

TRAILING INDICATORS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KEY COMPONENT

SALES

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• Value -

What customers and investors are willing to pay for, that employees are willing and able to provide. In a public, for-profit enterprise, sustainable value requires all three groups. Value must be worthy to those paying and those providing or it will not endure.

Mickey Connolly and Richard Rianoshek, Ph.D.

The Communications Catalyst

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• Every product or service you can provide is one less reason for your customers to talk to your competitors.

• Every product or service you provide is one more reason for your competitor’s customers to talk to you.

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

Customer Name Customer Expectation

Score

1 - 5

Comments

Sales

Product & Design

Order Administration

Associated Services

Delivery & Installation

Customer Service

1= Low 5 = High

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• KEY INDICATORS SALES• SALES ACTIVITY – SEE CHART• BID LISTS

– NUMBER OF BIDS PLACED

– PERCENTAGE OF SUCCESS ON BIDS

• DOLLAR VOLUME OF QUOTES• NUMBER OF ACTIVE CUSTOMERS• NUMBER OF NEW ACCOUNTS• NUMBER OF NEW ORDERS• AVERAGE GROSS MARGIN/PROFIT• GROSS PROFIT PER DAY• DOLLARS PER REP• BACKLOG• SALES TO PLAN

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• SALES ACTIVITY

GOAL TASK/OBJECTIVE TIME FRAME

Average monthly gross

sales = $

Average daily sales = $ Within next ___months

Average monthly GP

dollars = $

$___________ Within next ___months

Number of calls needed per day =

Number of appointments needed per day =

Number of orders needed per day to equal daily average of $________=

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

GOAL TASK/OBJECTIVE TIME FRAME

Number of orders needed per day to equal daily average of $__ GP dollars =

$____________

Ratio of appointments to orders =

____ appointments to ____orders

Average dollars per sale = $____________

Average GP dollars per sale =

$____________

Average Number of calls to make per week =

____________

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

GOAL TASK/OBJECTIVE TIME FRAME

Average Number of calls to make in next 30 days = ___________

30 DAYS

Average Number of calls to make in next 60 days = ___________

60 DAYS

Average Number of calls to make in next 90 days = ___________

90 DAYS

Number of new accounts to open in next 30 days =

___________

30 DAYS

Number of new accounts to open in next 60 days = ___________

60 DAYS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

GOAL TASK/OBJECTIVE TIME FRAME

Number of new accounts to

open in next 90 days = _____________

90 DAYS

Sales Mix

Number of orders/dollars generated from new Accounts per month =

_____/________

Number of orders/dollars generated from established ongoing accounts =

_____/________

Review of Top Ten & rolling forecast to identify and focus on opportunities and activity

On a weekly and monthly basis

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

GOAL TASK/OBJECTIVE TIME FRAME

Product Mix

Number of orders/dollars generated with primary vendors per month =

$_____________

Casegoods dollars

$_____________

Seating dollars

$_____________

Systems dollars

$_____________

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

FORECASTING -

A CRITICAL METRIC

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

TARGETING PLANName Date

Top Ten Hot List/Close/Dollars Top Ten Target List1. 1. 2. 2. 3. 3. 4. 4. 5. 5. 6. 6. 7. 7. 8. 8. 9. 9. 10. 10. Lead Sources

Prospecting Plan30 Day Booking Forecast - 30 Day Billing Forecast -

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

ACCOUNT VENDOR BOOKING MONTH

$’S BOOKED GP% / $’S BILLING

MONTH $’S BILLED

GP% / $’S ABC, Inc. United 1. Nov. 40,000 34/13600 1. Nov. *20,000 34/6800

Hon 2. Dec. 15,000 28/4200 2. Dec. 40,000 34/13600

Seatability 3. Jan. 6,000 35/2100 3. Jan. 15,000 28/4200

Cowabunga United 1. Nov. 32,000 31/9920 1. Nov. *9,000 35/3150

Global 2. Dec. 27,000 33/8910 2. Dec. 32,000 31/9920

Kimball 3. Jan. 19,000 25/4750 3. Jan. 27,000 33/8910

1=CURRENT MONTH

2=NEXT MONTH

3=MONTHAFTER

NEXT

$ TOTALS:

1. 72000

2. 42000

3. 25000

$ TOTALS:

1. 23520

2. 13110

3. 6850

$ TOTALS:

1. 29000

2. 32000

3. 42000

$ TOTALS:

1. 9950

2. 23520

3. 13110

* Represents booking from previous forecast .

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

STRATEGIC PARTNER OR ABUSIVE MATE?

SELECTING YOUR PRIMARY

VENDORS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

PRIMARYSECONDARY

TERTIARY

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KEY COMPONENT

ADMINISTRATION

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• KEY INDICATORS ORDER PROCESSING– TIMELINESS– ACCURACY– INTERNAL PROCESSING COSTS– ERROR RATE– COMMUNICATION

INTERNAL

EXTERNAL

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• KEY INDICATORS HUMAN RESOURCES– Productivity– Contribution– Participation– Dependability

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KEY COMPONENT

OPERATIONS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KEY INDICATORS OPERATIONS

• SELLING SERVICE AS A PERCENTAGE OF YOUR BUSINESS

• PROFITABILITY OF SERVICE OFFERINGS• DELIVERY TIME AND COMPLETION• INSTALLATION COMPLETION• PUNCHLIST• SERVICE CALLS – COMPLETING ON THE FIRST CALL• FINAL SIGN OFF

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

Meeting the test• Determine the need for the product or service

Is it a long-term sustainable need?

• The cost of providing the product or service

• Level of service you and your company can provide

• “Implementability”

• Impact on your current business

• R.O.I – Return on Investment

• Measuring for results

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

The Cost of ServiceLabor - Wages, Taxes, Benefits

Space – Taxes, Utilities, Rent/Mortgage,

Insurance, Office Equipment & Supplies,

Maintenance

Equipment – Tools, Machines, Maintenance,

Supplies, Vehicles, Insurance, Phones

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KEY COMPONENT

FINANCE

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

KEY INDICATORS FINANCE/ACCOUNTING• ACCOUNTS RECEIVABLE

– 75/10/10/5 RULE

– DSO

• ACCOUNTS PAYABLE– DISCOUNTS TAKEN/OFFERED

– LINES OF CREDIT AND LINE DRAWN

– VENDOR RELATIONSHIP

• CASH FLOW– WORKING CAPITAL - DOLLARS AND RATIOS

• BANKING RELATIONSHIPS• BOOKED TO BILL RATIO

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

• BENCHMARKING– OFDA– BIFMA– MANUFACTURERS– INDUSTRY ORGANIZATIONS