![]() ![]() If you aren’t already implementing these tips, especially the last three, then it’s time for you to step off the shop floor and start working on your business. In my shop, we shoot for 15 percent of gross sales or less per customer 20 percent is our absolute upper limit. Allowing one customer to account for more than 20 percent of your sales creates a situation where losing them could sink your ship. You want to keep your large customers to 20 percent of your gross sales or less. If one customer makes up 30-40 percent of your revenue, it’ll significantly affect your valuation. This tip may feel overrated, but it’s super important, especially when looking at your business from a valuation point. In your business, figure out a realistic number for your growth, create a plan to achieve it, and then stick to it.ĥ. More than 25 percent can make it too difficult to keep up with the cash demands, but less than that isn’t enough fuel for our fire. In my shop, we currently shoot for 20-25 percent growth per year. You don’t want to grow too quickly and go off the rails, but you don’t want to grow too slowly either. However, you really need to create a realistic, repeatable strategy to control your growth. ![]() Sometimes, as a small business, it can be hard to follow a growth strategy because so much of the business is fly-by-the-seat-of-your-pants. For us, losing the credit card fee is offset by the benefit of having cash in hand early.Ĥ. We also waive the credit card fee for customers who pay in full. For example, we offer a 2 percent discount for upfront payment. You may also want to consider giving an incentive for customers to pay early. When you’re talking about design, measurements, and materials, tell your client how you collect payment. Set the expectations for your customer from the beginning. You need to put in place a consistent collection process where, regardless of who is in the office, money is being consistently collected when jobs are complete. Have a system to efficiently collect money. Not only will the environment help you retain your employees and end the cycle of persistent turnover, but your shop will become a place that attracts other high-quality candidates.ģ. Finding quality employees allows you to create a great work environment where your people actually want to be. ![]() Your team should always be driving toward the same goal as you. Your employees will take care of themselves because they don’t want one bad egg to ruin it for everyone. Once you find several quality employees, your shop floor becomes self-policing. Find a recipe that works for you to find, hire, and retain good employees. Have a stable group of employees and management. If you can drive your costs down just a few percent, you can have a huge impact on your net profit.Ģ. Keeping your margins at or above industry standard is one of the most significant ways to add value to your cabinet shop. Overhead, labor and other fixed expenses are not a cost of goods sold. Things that are not included in CoGS are expenses you pay regardless of the sales you make. You should include anything that you need specifically because you won a job in your CoGS. Your CoGS includes all of the physical pieces that can be attributed directly to a job.ĬoGS = plywood, hardwood, commissions, contract labor, etc. Gross Sales - Cost of Goods Sold = Throughput It’s as simple as sales minus cost of goods sold. When you assess your margins, you’re really measuring the amount of product flowing through your shop. For us, throughput makes sense, but use what works for you. Other shops may call it gross profit or gross margin. In my shop, we use margin and throughput interchangeably. Know your margins and keep them at or above industry standards. If you want to own a thriving cabinet shop, then there are five very important things that you need to prioritize.ġ.
0 Comments
Leave a Reply. |