Selling Value and Focusing on Profit

By Richard Jones, Stanek Windows
April 3, 2012
COLUMN : Dealer Perspectives | Management

Many of us as window and door dealers have managed to sustain our business in some of the worst economic times in history. Some dealerships in our markets did not and closed. My company has locations in three markets–Tampa; Cleveland and Milwaukee–so I have some idea what is happening on more than one dealer location front. I do not claim expertise, but hopefully I can offer a little common sense.

I first entered the window and door, in-home sales, home improvement, remodeling space in the mid-80's. It seems so long ago that I do not recall the exact year. Since that time, I have witnessed many dealerships fail while others thrived, grew and sustained themselves. Some have passed to the next generation of ownership, many times within the same family.

Why did some succeed as others failed? Profits.

Profits allowed the owners to reinvest in a better showroom location or new equipment, stay current with operating and information systems, develop Internet websites, advertise more than their peers and most of all enjoy the fruits of ownership in a demand business. Profits allowed some to add new locations expanding their businesses and revenues leading to more profits.

Weak Markets
Since 2005, we have worked within an enviroment with significant reduced window and door demand. The need for our products was on an upward trend until 2005, when sales peaked at 70.5 million window units, according to Ducker International. After the peak, there was a rapid and steady decline, with a brief spike in 2009 and 2010 caused by the energy efficiency tax credits in the 2009 stimulus package. Sales then fell off in 2011 again.

During these times, we have read in this publication of many manufacturers that closed plants, filed for bankruptcy or closed entirely. Some were considered industry leaders and innovators. On the dealership level, there were numerous closures. In my three markets, there were several "volume - deep discount" dealers that closed during the fourth quarter of 2011 and the first quarter of 2012.

Many of us in the business are not "volume" dealers by design, but arrived there as our business grew on the basis of quality, service and premium products during the years of increased demand. Some of us were caught up in the volume craze and added "drop" products–a.k.a. good, better, best–supported by manufacturers willing to sell price point products. Some dealerships adjusted to the decline with continued focus on the three principles of quality, service and premium products, making difficult business decisions to reduce expenses. Difficult choices had to be made often by cutting payrolls, reducing health care coverage and keeping service equipment longer than normal. Maybe just breaking even was the best possible result.

How do we sustain our business by increasing workloads at lower or no profits? Where does the additional cash come from to pay employees, suppliers and most importantly pay business owners?  WDDA is sponsoring a national benchmark service initiative to help provide answers that can assist owners and executives to better manage a dealership by comparative peer information. It will be a reference area for dealer members to gain unbiased information and business guidance.

Dealership owners must also realize that selling services at ever lower prices to compete is only accelerating the end. We must continue to adjust operations and expenses until the window and door business begins the long expected incline back to higher levels of business. Is this the year?

My company has managed to maintain our price points by selling value based on our market reputation and with a significant referral base. We maintained higher levels of quality installations without compromising the company value statements. Sure, we lost a few deals, but we closed many more than we lost. Our closing rates of demos to sales is extremely high, with excellent customer endorsements. Our buyers expected higher quality products, they expected close attention to detail during installation and they expected service support when needed.

Many of the deals we lost were 20 percent to 40 percent below our quotes.  We could only wonder how the business owner could afford to leave so much margin behind. Our competitors' costs to replace the windows and doors, to make repairs to building structures, and to meet the many code regulations we face today are the same costs as ours.

Understanding Costs
We pay for workers compensation and liability insurance. We have EPA LRRP costs.  We pay for permits with code inspections (especially the higher costs associated with coastal state hurricane impact compliance). We cover installer certification and training and pay taxes. With all these costs, how does a competitor cut prices by 20 percent to 40 percent and thrive?

WDDA dealer members are the best in their markets supported by quality-minded manufacturers and trusted by consumers in their communities with many in business for decades. The next generation of ownership is entering at a time when all current forecasts suggest we can finally expect some real growth. Dealers have converted to the technology age, with most using the Internet and all the electronic gizmos available today trying to stay up with consumer expectations of instant response to their needs.

Many of dealerships were in business in the mid-80's when business was simpler. Yes, there really was a time with fewer regulations, fewer competitors, no internet, no cell phones and buyers were plentiful. Everything has changed and so must the window and door reseller.

WDDA was formed to commit to an informed membership of window, door and in-home products resellers. WDDA is dedicated to being a centralized place to share ideas, to network to educate; however, our existence still comes down to running a profitable business.

 

A member of the Window & Door Dealers Alliance advisory board, Richard D. (Rick) Jones is president and CEO of Stanek WIndows.  Based in Cuyahoga Heights, Ohio, the company has been manufacaturing vinyl windows since 1988 and currently operates sales and instlattion operations in the Cleveland, Tampa and Milwaukee areas.  More information about his company is available at www.stanekwindows.com.