These are the creative business people who offer an irresistible deal to capture a low profit sale and rely on their selling skills to build back end profit to the deal.

These business people have discovered that training the sales force to consistently offer specific cross-sell and up-sell opportunities turns marginally profitable customers into profitable ones. If the salesperson can up-sell a marginally profitable customer into a high margin custom molding or cross-sell into a very profitable lighting system for the glass front cabinets; great margins can be made.

The first step to successful cross and up-selling starts with listening to the customer. Before a highly trained salesperson (a.k.a. sales pro) starts talking about budget; they ask the customer about their wish list and listen carefully to which items they like and which ones they love. Then they quick quote them based on their wish list and ask them how that price compares to their budget. Most of the time customers are surprised by how much it actually costs to get what they truly want.

The sales pro begins by setting the ground work for future sales and talks to them about the products that can be removed from the bid but can be purchased later. Then they stress the value of factory installed upgrades, like dovetail drawer guides.

The key to this successful approach is this: the sales pro lets the low-margin customer know that it is them (the customer) who is in control of how much they spend. The sales pro is simply there to help the customer make educated choices. That’s because the sales pro knows that the average kitchen buyer happily extends their budget by approximately 15% by investing in upgrades and additional options they learned about during the sales process. In fact, industry research shows the average buyer’s main frustration with their salesperson is that the salesperson did not offer them enough upgrade opportunities. Instead of buyer’s remorse, customers have remorse that they didn’t spend enough!

The key is the sales pro’s pressure free, educational approach to sales. They let the prospect know that they are a very valuable resource to them during this process, and they take time to show their product knowledge. They ask their prospects to experience the upgrades. They encourage prospects to have fun and enjoy the process of creating a dream kitchen. They make the prospect feel comfortable enough to ask any question. That’s because the more informed the prospect, the more comfortable he/she is in making a big decision.

This is also a critical time for the sales pro to reestablish their company vs. the competition. That’s because the sales pro assumes that no matter what the prospect tells them, there are at least 2 other competitors bidding on the business.

As they are educating the prospect on getting the most kitchen out of their budget, the sales pro also stress the features and products that cannot be obtained from the competition. That means they take time to shop the competition to understand their offerings. This helps them know how to position themselves as the best alternative. Is their advantage quality? Service? Product? They make sure the prospect knows how to distinguish them before he/she leaves the building.

Beginning salespeople sometimes fall into the rut of describing products and their company’s unique value in a very factual manner. The pros know that prospects remember stories and buy based on emotion. So they tell them stories of people who made similar upgrade choices and the benefits they received. They talk about the satisfied customer’s emotions. How happy they are. That’s because this is more persuasive and memorable to the prospect.

A good open dialogue will offer an attentive salesperson many up-sell and cross-sell opportunities. But it is also important to be attentive to the prospects state of mind. Are they getting tired? Confused? Anxious to make a decision? Sales pros sense this and stop cross and up-selling so they can ask for the business and close the deal.

They also take time to tell them how much they enjoyed helping them make the right decisions and that they now look forward to helping them get their project underway.

“You really only need one supplier for cabinets in our industry”.  Ever hear that before?  Ten bucks says it probably came from a manufacturer rep or even a manufacturer executive.  The bet is it didn’t come from a fellow dealer.

It’s the same old mantra.  Just like they tell you that you shouldn’t live with a woman before you get married. We keep saying it but our kids just aren’t buying it.

So as you probably know by now, I don’t really have a set opinion on things, nor do I like to get people riled up.  But I will say this:  If you buy into this mantra for the cabinet industry you are completely insane.

Why?

Well, let’s take a look at some of the pro’s for carrying one supplier. The manufacturers who want you to sole-source with them would say:

• Coordinating multiple suppliers takes time and effort, and therefore more costs
• You have to negotiate different contracts
• There are multiple customer service departments you have to deal with
• Us being your only supplier means we will love you (not just love but be “in love” with you)
• There is more complexity
• There are more training needs for you and your staff
• Did I mention that I will stare into your eyes longingly and be a very caring/nurturing partner?

Now I won’t name any names (ahem), but I think we all can relate to the intense damage which can be done when our eggs are predominantly in one supplier’s basket. You can actually go out of business!

Carrying multiple vendors for cabinets is important — especially in a non-standardized market like ours. Yes it is a challenge, but it also reduces your risk. What risks, you say? Like these risks:

• What if your supplier goes direct?
• What if they decide to raise prices?
• What if there are gaps in their product availability?
• What if there is a disaster — like a fire or tornado — that severely impacts the delivery of your product?
• What if, after your loving relationship, you decide it’s not them, it’s you and you want to move on?

It’s funny to me that manufacturers think this is a loyalty issue. It’s even funnier when I hear it from the @#^%$!@ who are currently going direct in my market!

Conclusion

I say get off the old mantra already. We’re tired of hearing it and no one is buying it. It’s like that weird smell in someone’s office that nobody wants to say anything about. Some dealers have too many suppliers, yes. Some have not enough. OK fine.

But most of us are struggling to attack niche markets with suppliers that fill necessary market gaps that you don’t offer — or maybe you do but the price point is silly.

Instead of chatting about the same old mantra, how about improving your line so you’re more competitive for us? Or I don’t know — how about stopping the manufacturer direct silliness and actually sticking your neck out to build some loyalty around here. Lord knows we could use it right now.

Who knows — maybe the market will pick your line for that niche opportunity of ours for a change.

Of course we’ll all be here in 2009 bitching about the same thing, but that’s me just stirring up the pot in the hopes that something interesting would change for 2009.

It’s a funny thing really, having your manufacturer offer financial incentives directly to your salesreps so they will sell their products. And in more sophisticated industries, business owners would have the asses of their manufacturers in a sling if they offered SPIF like rewards to their employees directly.

So why is it OK in the cabinet industry? How can manufacturers get away with that?

The Answer

I think it’s ignorance. Now before I get accused of calling people stupid, remember that ignorance is synonymous with “not knowing”. I’m ignorant of a lot of things — especially about how women really think. That doesn’t make me stupid (although a few of my female friends would argue otherwise).

So dealers are predominantly a bunch of construction guys (and sometimes gals) who started their own businesses out of the back of their garages. They are successful operations in their own right, yet they remain ignorant of how they really should react to manufacturer SPIF programs.

So let’s explore a SPIF for a moment. Consider the normal chain of parties involved in selling a product.

1. Manufacturer
2. Distributor
3. Dealer
4. Dealer Sales Rep
5. Consumer

The manufacturer is somewhat hidden from the consumer because of you, the dealer, so the manufacturer is limited in how to influence the buying decision of the consumer. The more layers in between the manufacturer and the consumer equates to the more places where a deal can be lost.

A SPIF in our industry usually comes in the form of cash or a cash-equivalent reward of some sort which is paid directly to your salesreps as an immediate reward for selling their product. It is a sneaky way of back-dooring an incentive and jumping the normal chain of command to get closer to the consumer where the decision to buy (or not buy) is made. When a SPIF is in place, the chain looks more like this:

1. Manufacturer
2. Dealer Sales Rep
3. Consumer

Manufacturers are 1-2 steps closer to the sale (notice how the dealer can get cut out of the loop). But SPIFs put dealer management in an awkward position. Consider this:

• What if you were trying to push cabinets from manufacturer B for a significant rebate but manufacturer A was offering a SPIF to your salesreps? You might not make your revenue target to get that rebate you need so badly for other areas of the business. That’s because the cash flow was just redirected to your salesrep’s wallets.
• What if you were negotiating with a manufacturer for better terms and using your volume with them as a lever in the discussions? If your salesreps are being paid in cash to move that product (SPIF’ed) do you think the manufacturer may have you over a barrel? You bet they will! You may want to pretend that you can move that volume over to another line but how will you do that when your salesforce keeps selling it?

Manufacturers have figured out the cabinet industry for a long time now. And they know what makes your salesreps tick. Once a SPIF is in place it is going to be very difficult to remove it.

So what’s the best practice here?

SPIFs are EVIL and Must be Destroyed

SPIFs are damaging to almost every aspect of your business and your market strategy. The only thing they ever benefit is the salesperson and the manufacturer.

1. SPIFS make salespeople offer product because it is better for themselves, not necessarily for the customer
2. SPIFs can alter your revenue targets and overall business plan
3. SPIFs are done outside your management team — sometimes even without your knowledge
4. Someone has to pay for the SPIF. This is most likely not eaten long term by the manufacturer — rather, it is built into the overall cost of the product and passed on to you so the SPIF can be offered to your salespeople. In other words, your paying extra cash to your salespeople with a SPIF even if it doesn’t sound that way.

Conclusion

A SPIF is fundamentally no different than Ford bribing the local school city official to make all city vehicles Fords — behind the back of the Mayor. It’s the stuff that makes front page news, and makes senators look really stupid (not ignorant). The next time a manufacturer offers a SPIF to your salespeople, stop it dead in its tracks and demand a lower cost factor instead. Or force them to offer a rebate back to the BUSINESS and you can decide how to allocate that down through your commission programs (if at all).

Then tell the manufacturer that the next time they stick their hands like that in your business, you’ll start shopping for another line.

Remember — salespeople get rewarded from you, not your manufacturers. If a manufacturer wants more volume, they need to improve the quality, price, service or delivery of their product. If the manufacturer’s sales are down, they probably have a problem with one of those areas in relation to their competition. Allowing a SPIF simply enables a manufacturer to hide from their real problems.

SPIF’s are the dinosaurs of the cabinet industry, and they should have suffered the same fate: extinction.

But that’s just me, stirring up the pot.

Years like this are when astute cabinet dealers take a closer look at their operations and find new ways of doing business that reduces cost and gets more productivity out of their people. Over the years there has been a debate about centralized vs. decentralized purchasing. Fans of centralized purchasing think it’s a good way to get extra sales time inexpensively.

Traditionally most dealers have had their salespeople do their own purchasing. This way of doing business started back when the owner founded the company. He or she designed the kitchen, ordered the products, coordinated the delivery and even collected the bill. When it came time to add more salespeople, they just followed the owners lead.

As the sales teams get bigger, most dealers begin to have delivery coordinators and accounting staff free up salespeople’s time by making someone else responsible for kitchen installation and collections. The salesperson spends less time doing what they don’t like – pushing paper – and more time doing what they like – selling. It works out great for everyone.

Many dealers are slow to apply the same logic to purchasing. Let’s say you have a sales team of 5 salespeople, all of whom spend 20% of their time filling out and placing purchase orders. For the price of a purchasing agent – you can get a salesperson and 2,000 hours of selling time back. Even in a tough sales market – that’s a good deal.

Most companies who centralize purchasing have the salesperson or associate do the kitchen design and prepare the quote for the prospect. After the quote is approved is when things begin to change. The salesperson in the centralized purchasing environment will create a job packet and send the information to the purchasing agent.

The purchasing agent is responsible for reviewing the design, organizing the required materials by supplier, and then creating and placing the purchase orders. Some variations exist, but for the most part the purchasing department also receives and checks the manufacturer’s confirmations and enters the cost information into the accounting system.

The purchasing person becomes the point person for the salesperson on order status questions. Back-orders, anticipated delivery dates, modifications to the orders and rush orders are all handled by the purchasing person. The purchasing person takes on a lot of paper and follow-up work that normally robs salespeople of their selling time.

Building supply companies and cabinet dealers with multiple locations can centralize purchasing as well. They can have the salespeople at each location fax or e-mail the design and quote to the purchasing department – who then processes the paperwork.

There is a caveat to centralized purchasing – quality control. Cabinet dealers produce a lot of paperwork and sometimes that paperwork contains a lot of errors. A salesperson placing their own orders can easily hide their mistakes (and the cost of those mistakes) with a few quick calls to the manufacturer.

Salespeople who also place orders can easily forget items that directly deal with the manufacturer and mark these items as a “service”. A centralized purchasing system can easily identify these errors and charge it to the job instead. Initially this can be painful to the sales rep’s commissions; however, it teaches the salesperson to be more careful and helps the dealer recapture lost profits.

Industry leaders feel that best practice is to eliminate all the passing of paper between sales, purchasing, receiving and accounting by automating the entire process. Dealerships that have made this leap have seen a single purchasing agent be capable of supporting over 15 salespeople who sell over $30 million worth of kitchens and related products per year.

Should you centralize purchasing? I don’t know. But I do know that you should spend a day watching your salespeople. Are they spending the majority of their time doing the things that make a difference in your business? If you answered no, centralizing purchasing can likely be your first step in a more efficient direction.

The best salespeople sell up to $4 Million per year; while the poorer performers might only sell $200,000. Some of the variations can be explained by differences in markets, products and types of customers served; however, in working with over one thousand cabinet salespeople over the years, I found the real reason for the differences boils down to one key issue – organization.

Salespeople are notoriously disorganized. They often remind me of my son. He is ten years old, full of enthusiasm and wherever he goes, a pile of toys lies in his wake. But when he wants to play outside, he often spends twenty minutes looking for his shoes. Over the years I’ve tried to help him by adding more structure. Now might be the time you should help your salespeople by adding a little more organization to their life; so they don’t spend 20 minutes looking for a file every time a customer calls.

Over the years I have developed a system that helps salespeople with organization. This system is comprised of 3 areas:

1. Capturing
2. Planning
3. Follow Up

To start, the salesperson will need to go to the office supply store and buy a 250 page lab book, plastic inbox/outbox trays, a 31 day expandable folder and a 12 month expandable folder. The whole package won’t cost more than $20.

Capturing

All salespeople’s work comes from one of three sources – conversations, email and or physical documents. The system I share with you uses the lab book, email folders and trays as tools to help salespeople capture all their obligations in consistent places so that when they take time to organize their commitments, it is fast and easy to find all of them.

The process is simple. Have the salespeople keep their lab book with them at all times. Any time a customer requests additional work, the installer calls for another filler or the superintendent calls about rescheduling an installation; the conversation should be recorded in the lab book. All action items or commitments should be starred or highlighted so they can be easily found.

Next, better organize their e-mail. Educate your salespeople on the value of adding folders to their inbox. Sources whom the salesperson gets e-mail from frequently, like a superintendent or e-newsletter from a manufacturer, should have their own folder. In addition, folders named “delegated” and “planning” should be added. Next, use your e-mail software’s rules or filters to have e-mail from the frequent contacts automatically routed into their respective folders. The main inbox should only contain e-mails that the salesperson needs to read and act on. For many salespeople, this is like giving up crack cocaine. They must get to the point where if an email does NOT require action, it does NOT need to be in their inbox. It should be filed in an email folder for reference.

Another note on email; many salespeople get too much junk mail (non-work email). The amount of junk email increases over time, and every junk email that has to be looked at is a chunk of a salesperson’s time. Have your administrator get a sense of how much non-work email is being received. Find a good junk email filter system. Some dealers even change a salesperson’s email addresses periodically so that they can control this type of time-waster.

The plastic trays provide salespeople with a single place to put all the paperwork they receive. The trays serve the same purpose as the shoe rack by the door where my son always keeps his shoes. It is a single place where all installer punch lists, designs that need to be reviewed and measurement notes are stored. Any document telling the salesperson to do something should go in the inbox tray until they review it in their planning time. Documents currently being worked with should be stored in a file on the salesperson’s desk. Completed work should be in the outbox tray.

Planning

This next part requires discipline. Two or three times a day, the salesperson should spend up to 30 minutes planning. This involves reviewing all the new commitments they recorded in their lab book or received in their e-mail or inbox tray and organize them for completion. The key to success is decisiveness.

The salesperson should go to their lab book, e-mail and inbox tray and review all their new commitments. All these commitments are not the same. Some will take little effort to complete; others will take hours of focused effort.

If a follow-up call, response to an e-mail or verification of a customer’s kitchen measurements takes under two minutes to complete; the salesperson should do it right then. A quick response to an e-mail and short calls should be taken care of during this 30 minute planning session.

The salesperson will then have two types of tasks left. A set of tasks that can be delegated to others and tasks that need focused time to complete. Completing a kitchen design and taking measurements are good examples of tasks that need focused time set aside for their completion.

Encourage your salespeople to delegate anything that doesn’t directly contribute to new sales (i.e. service follow-up activities, any type of investigation work, job status inquiries, scheduling issues, etc.). Most salespeople’s sales production is limited due to their poor delegation skills. Remind the salesperson that if they are going to be successful delegating they need to be clear about what the task is, the time and date of any interim follow-up, clarity about when the task is due and what the result is when the task is successfully completed.

Salespeople also have a tendency to be over optimistic about how much work they can get done. Here’s a little trick that I use to help them keep on track. When the salespeople review their commitments, I tell them to estimate how long it will take them to complete the task if they have no interruptions. Then, when planning to complete the work, I insist they book only fifty percent of their time to planned activities.

Why? Because no one in the cabinet industry has more than 20 minutes of uninterrupted time and interruptions cost the salesperson 50% of their focused time for planned activities.

Follow Up

So now the salesperson has looked at their lab book, email and inbox tray and either completed the task, delegated or planned for doing the work themselves. What’s missing? Follow up. Good follow-up is how the salesperson avoids spending their entire day fighting fires.

Providing a good follow-up system is where the expandable file folders come in. During the daily, 30 minute planning sessions, the salespeople should keep a pad of paper with them. As each task is either delegated or planned for later, the salesperson should drop a note in the slot of the 31 day file folder corresponding to the date the salesperson is to start the task. Place the note in the slot of the 12 month folder that corresponds with the month the work should start if the start date is more than 31 days away.

Every Sunday night the salesperson should review their schedule and 31 day file folder to review the week’s commitments. At the end of every month, the salesperson should pull all the following month’s information out of the monthly expandable folder and organize it into the 31 day folder. The notes for work that has been completed should be thrown out and any related e-mail should be moved to an archive folder from the “delegated” and “planned” folders on the salesperson’s computer.

This is called a “tickler file”. It allows the salesperson to forget about the commitment once they file it, knowing they will be automatically reminded of it when they get to the day it was assigned. It keeps everything nice and clean and gives the salesperson more selling time, not to mention less stress from trying to keep all the commitments in their heads.

Conclusion

There you have it. Most studies say the average executive manager loses over an hour a day just looking for paperwork. I don’t know about you, but many salespeople I have worked with are much less organized than a manager – so there’s no telling how much time a disorganized salesperson loses. And when a salesperson is disorganized, most of their stress comes from emergencies and issues that bite them later from the disorganization itself.

With a little discipline and this system you can help your salespeople gain back most of their wasted time and selling more of your products & services. In addition, you can help them have a better quality of life from the reduced stress level.

It went on to discuss how you could pretty much start anywhere in the circular sales process (even run it backwards) because hey, it’s a circle. Circle of life. We’re all connected, right?

Well, not really. If you can’t measure something, it’s really hard to determine if it’s working. And if there’s no process, it’s really hard to instill a discipline in your salesforce. If anyone can start anywhere in a circle which can run forwards or backwards, how in the hell will you analyze if your sales process is working?

Building a House with No Foundation

That would be like saying you can build a house by starting with window installation. I guess you could buy the windows, but you sure would have trouble installing them with no walls or foundation. A sales process really needs a defined set of steps to follow – a foundation which slowly and naturally builds you towards a successful transaction. That’s the science, really. A repeatable, trainable process which allows you to measure and improve upon. A process which dramatically increases your chances of winning work.

Salespeople without a process stumble into sales when times are good. They really suck when times are bad. And you hold onto them because you can’t quite figure out if it’s their performance or the market’s which is causing everyone’s grief.

So measuring sales is tough. Holding salespeople accountable is tougher.

Implementing a sales process is tough. Uncovering bottlenecks in your sales process is tougher.

Instilling a discipline in your sales force is tough. Getting rid of poor performers who don’t follow a discipline is tougher – especially if the perception was that they performed in previous market conditions.

The Art of Arguing About Silly Crap

I have a friend who gets really frustrated with the current debates. He says they spend too much time going back a few years and trying to point fingers at why we are where we are. Have you ever tried to recreate the past? Holy crap, I can barely remember what I did last week let alone a year ago when the market was better.

Sales trophy or no sales trophy, it’s time to start over from scratch. Forget about the past. Clear the scoreboard, get a sales process and begin measuring. And don’t be shy. Have difficult conversations. Don’t be afraid to let your biggest complainers go. Make room for new blood and new perspectives. Churn the salesforce to find a new gem. Give trophies out ONLY to top performers. Make people excel for that thing. Hang an extra day of vacation on that baby and get people to want it so bad they’ll change.

Answer Only in the Form of a Number

If you want to be in sales, you need to really want to be in sales. That means avid reading and studying of sales techniques and strategies. That means learning, trying new things and not complaining about it. And a sales process which can be measured is a great tool to get rid of excuses and complaints from salespeople. That’s because whenever anyone complains, all you have to do is ask them about their pipeline and what is about to close. Not what they feel might close, but rather answers in the form of numbers. Like this:

“I have three new prospects that just entered our sales process for a total of eight deals I’m working on. Two are early on in evaluation stage and three are in the final stages of negotiation. Based on the last few months it looks like at least two of those three deals will close in the next twelve days because our average days to close was trending down last month from fifteen days to twelve with the recent improvements we made in our sales process”.

Wouldn’t that be dreamy?

Conclusion

So, don’t listen to anyone who tells you that implementing and measuring a sales process is a waste of time. Because not implementing and measuring your sales process wastes everybody’s time.

And seriously, a sales process is not a circle. But that’s just me stirring up the pot.

When closing sales gets tough, it’s always good to go back to the fundamentals; and there is nothing more fundamental to sales than following a 6 step sales process. The purpose of following a sales process is to make sure your salespeople are spending most of their time with prospects who are likely to buy. This is accomplished by breaking the sales process into six steps and setting specific objectives for the salesperson during each step in the sales process. The six steps are assess, match, evaluate, propose, negotiate and post sales service.

Assess Stage

During the assess stage, the salesperson is gathering information about the customer’s product interest and financial qualifications. Idle conversations about the person’s home, how long they have lived there, the styles of cabinet they like, their budget and time frame for making a decision should all be gathered during this stage. Most salespeople are very poor during the assess phase but think they are very good. Watch them. Are your salespeople listening to prospects talk about their needs for at least 30 minutes before showing them any product?

If your answer is no, your salespeople should be asking more questions. Salespeople should use open ended questions to learn what the prospect wants to buy and how they want to be sold to. Great salespeople persuade prospects to purchase by asking them a lot of really good questions and then selling the prospect exactly what they said they want and can afford to buy.

Match Stage

The assess phase sets the stage for the “match” stage. This is when the salesperson shows the prospect the product, educates them on the product benefits verse other alternatives and receives specific feedback on the prospect’s preferences. The salesperson asks for commitment on the prospect’s product preferences, acceptance of prices and desired delivery schedules. The salesperson is trying to excite the prospect to the point where they want to take action. Excitement, enthusiasm and a clear buying vision should all be established in the prospect’s mind before the salesperson considers the prospect ready to move on in the sales process.

Evaluation Stage

Next comes the evaluation stage. If you are going to invest a significant amount of time laying out and pricing a kitchen, you deserve the courtesy of your prospect telling you about their evaluation process. Ask them if they have their financing arranged. Ask them if there is anyone else involved in the decision process. Ask if they are talking to any other cabinet dealers. Ask them to commit to making a decision by a specific date. Make it clear to them that you want to give them all the information they need to make a good decision, but it will require a significant amount of effort on your part and what you want in exchange for your effort is timeliness and honesty during the evaluation process.

Propose Stage

When the evaluation is complete, the salesperson should be able to propose a kitchen that perfectly matches the expectations and budget of the prospect. This stage, the propose stage, is when the salesperson asks for the sale. The presentation of the final quote should be a review of previously discussed options and prices. There should be no surprises for either the prospect or the salesperson. This will make closing the sale easy. Most stress in a closing situation comes from asking an unqualified prospect to make a large buying decision based on incomplete information. The salesperson was afraid to discuss the price of the island and now the prospect is being asked to buy a kitchen that is outside their budget-and the salesperson worries the prospect will walk away. A little honest conversation prior to the proposal stage would help the salespeople avoid all this.

Negotiation Stage

The next stage is the negotiation stage. Most prospects will want to feel like they received a “good deal” on any major purchase. It is only natural for them to feel this way. The salesperson should strive to never use the words yes or no. Use a question to say yes or no for you and to close the sale. When a prospect asks for a reasonable discount don’t say yes. Ask, “If I can arrange for that discount for you, are you willing to approve your quote today?” If the prospect says yes; you have a sale- if they say no; you should ask why and soon you will uncover a hidden objection. The salesperson wins either way.

Post-Sale Service Stage

The final stage is called post-sale service. After a purchase a customer either becomes a company asset or anchor. The salesperson’s goal is to deliver to the production side of the house a new customer who has their expectations properly set. The salesperson should be visible enough during the delivery process so that they can smooth ruffled feathers and deepen their relationships with the new customers.

This new relationship is important for three reasons. First, the satisfied customer is likely to have friends come over and view their new kitchen; and you want them to speak glowingly about their experience. Two, if the customer is happy you can ask them for a quote or recommendation letter that can be used in future sales presentations. And third, and most important, you can ask happy customers for referrals. A referral is 5 times more likely to purchase from you than a prospect that simply walks in the door. So you want to get lots of referrals.

Conclusion

Implementing this sales process is simple. The sales manager starts weekly reviews with each salesperson where they ask their salespeople about their prospects. If the sales manager starts talking about the six stages and asks a consistent set of questions about prospects at each stage; the salespeople will soon start asking the prospects the same questions.

Unfortunately implementing a sale process is a lot like losing weight. The concept of losing weight is simple, eat less and exercise more, but accomplishing weight loss is very challenging. Losing weight often requires a little assistance. So, if you try to implement a six step sales process and fail, consider getting a little help. You won’t believe how much better you’ll feel after you’ve shed the weight of worrying about lost sales.

If you’d like some suggestions, feel free to contact myself or Chris Mele at 704.688.4090

I think of business as a game. If I play the game well, my business prospers. If I play the game poorly, the business fails. Since I think of business that way, I see teamwork as a critical aspect of achieving success and it surprises me how few cabinet dealers focus on getting the whole company involved in winning the game.

My four brothers and I use to play basketball. My oldest brother could kill any of us playing one-on-one. To make the game fair, we use to have two or three of the younger brothers play against him. When the younger brothers played as a team, we could beat him just about every time. However, there were times when my second oldest brother would try to prove he was as good as my oldest brother. He stopped passing the ball and would take a majority of the shots. We usually lost when that happened.

When I was running a cabinet dealership, I saw the competition as being like my oldest brother. It is bigger, stronger, and quicker than me. So when I tried to figure out how to compete, I remembered the lesson I learned from my second oldest brother. I would lose if I made it all about me and I had to get the whole company involved to win against a bigger, stronger, and quicker competitor.

I have asked hundreds of cabinet dealers about how they get their teams involved and four techniques seem to be common among those dealers who are getting the best results. The techniques are:

• Sales incentives

• Departmental and company bonuses based on profit

• Posting results publicly

• Team celebrations

Most cabinet dealers are using the first technique. Paying commissions is common in our industry. However, there are many different ways people pay commissions. The most effective way I have seen is to pay a variable percentage of the gross profit margin of the job, the commission % being higher if the gross profit margin is higher. This technique aligns interests. The larger the amount of gross margin produced, the more the salespeople and company make. Accurate cost tracking is the real trick here.

Many cabinet dealers struggle with paying on gross profit margin because they do not have an accurate way to capture their gross profit margin by job. To do so requires them to have an accurate measure of all the costs by job. Their lack of systems allows costs to slip through the cracks, not getting allocated to the correct job. So when a salesperson forgets to include the agreed upon hardware when he prices the job, and then rush orders it after the customer complains, that cost never gets tied back to the correct job. A centralized purchasing function will help you solve this challenge.

The second strategy is departmental and company bonuses based on profit. Sales incentives gets salespeople motivated to drive more gross margin to the business, now use profit sharing bonuses to get the rest of the team motivated to drive down costs and productivity up.

The challenge to making this technique effective is making sure you tie incentives to both department level and company performance. For instance, an average warehouse mistake costs you $250 to fix. So a good warehouse incentive is based upon the number of deliveries a month (productivity) that are correct and damage free (cost related).

Purchasing staff can receive incentives based upon the number of PO’s placed (productivity) with no errors (cost). Service people can be paid an incentive based upon the number of jobs completed (productivity) in one trip (cost). Small improvements can result in big changes in profits when you realize the average service trip costs a cabinet dealer $200 (when you DON’T have to replace damaged or incorrect product).

When cabinet dealers are setting up these incentive programs they often worry that the incentives will encourage one department to improve their performance by creating more trouble for another. I have a simple solution. Make 50% of the total bonus paid based upon department performance and the other 50% dependent on meeting company goals. Employees quickly learn they make the most money by improving departmental performance while meeting company goals.

Performance visibility is a key in this whole process. The department and company performance should be posted in a public area for all employees to see. You will be amazed at how focused on improvement your staff becomes when everyone can see how well or poorly each respective department is doing.

The information serves as feedback which becomes the driver of team work. Each individual is clear on their role within the organization, has a clear idea of how each department and the company is progressing on their goals. This gives all staff members the information they need to make improvements on how they do their job and how they can help other departments improve on their performance. This data helps eliminate “turf wars” and encourages cooperation between departments.

But knowing all this information is not enough. Team cohesion is built during times of celebration. Structuring celebration events is the fourth team building technique. Most people go to work every day to get a pay check. When employees are just showing up for a pay check, they usually spend their time trying to figure out how little work they can do and still get a pay check. Recognition, appreciation, and camaraderie are the catalysts that turn these sloths into valued contributors.

Team celebrations should be both small and large. A great opportunity for recognition is during monthly business reviews. Awarding a traveling trophy to the best performing department is a great first step. Bigger awards, such as a free day off, can be awarded for a significant quarterly achievement. A company outing at an amusement park is a great award for achieving an aggressive annual profit goal. Big and small, these celebrations create memories that connect employees with one another and helps reinforce the concept that business success results in good times for the employees.

If you like these concepts but are skeptical if they really pay off, I encourage you to read Jack Stack’s bestselling book, “The Great Game of Business”. Jack Stack is the CEO of SRC Holdings. In 1983 he bought a failing division of International Harvester and applied the principles I shared with you in this article. His success is impressive. An investment of $10,000 in SCR Holdings then, is worth $5.5 Million dollars today. I think that is a really good payoff!

Why?

Let’s Start Simple

From a technical standpoint, the failed launch is caused by the differences between configured and non-configured products. Semi-custom cabinets are configured products. The buyer selects from a number of different options to get the exact kind of cabinet they want. Non-configured are products like stock cabinets. The buyer picks from a limited selection of products and the manufacturer produces them in one way only.

Accounting systems are set up to deal with non-configured products. Loading an inventory system with all the non-configured products the dealer sells is more of a labor challenge than a technical one. Here’s a quick summary of the steps a dealer would go through to load non-configured products into an accounting system:

• Accounting system’s inventory module is loaded with sku’s (a.k.a. product codes), descriptions and costs, all of which should be easily obtained from suppliers
• Employees key in product codes on a sales order after selling items
• Purchasing converts sales orders into detailed purchase orders for order placement
• Revenue flows in into the G/L from the sales order and cost flows into the G/L from the purchase order with all the detail needed
• Management enjoys reports on cost of goods sold and other financial data it needs to manage the business

Houston, we have a problem - Configurable Product

If dealing with non-configured products is a “model rocket launch” for accounting systems then dealing with configured products is like “colonizing Mars”. Configurable products are made-to-order and dynamically customized or configured by the customer. Each configuration has a different cost associated with it. And these costs vary dramatically. This causes problems for traditional accounting systems which depend on static lists of product codes to track revenue and costs.

Imagine the challenge when the accounting system tries to handle the configurable product line in a traditional manner. One choice is to glaze a cabinet (15% upcharge), while another choice is to add a rollout tray ($250 charge). We have one product (the cabinet) and two options (the glaze and the rollout tray). This means the accounting systems need a static list of four SKU’s in order to quickly match cost to sales. The four combinations are:

• Cabinet only
• Cabinet with glaze
• Cabinet with rollout tray
• Cabinet with glaze and rollout tray

As the number of options grows, so does the need for NASA engineers. The engineers are required to tackle the technical challenges created by the length of the static list. The length of the list grows exponentially as options are added. The more choices you have, the more product combinations possible and the less capable a traditional accounting system becomes at dealing with all the data.

So when your local accounting software guru tells you he can handle your semi-custom line in the new accounting system he wants you to buy, ask him one question. “Which is greater, the number of sku’s needed to deal with our semi-custom line or the number of stars in our galaxy?” Unfortunately, the truth is the number of required SKUs is far greater than the number of stars in our galaxy.

If you want a truly humbling experience, go to a secluded spot the next time the night sky is clear and gaze at the stars. Now visualize multiplying each star you see by millions upon millions. That imagery should help you appreciate how many sku’s are needed to deal with a semi-customer cabinet line.

Now think of your staff creating and maintaining all those “stars” and how your server will slow down as your accounting system desperately searches for the right “star” among all those different options. I think you’ll come to appreciate why even very bright people fail when they attempt to use traditional accounting systems to track configurable products.

Unfortunately, the sad reality is that the brute-force approach to solving the configurable product challenge doesn’t work. But what does?

Come On, Everyone Knows Size Really Matters

I remember my college girlfriend telling me that the size of the cabinet dealership I might own one day really didn’t matter. Well, when it comes to dealing with configurable products it does, trust me. Smaller dealerships should ignore the inventory module of their accounting system and use paperwork to replace its function. The paperwork will be labor intensive, contain errors and be difficult to manage; however, at lower sales volumes paperwork is very cost effective.

But strange things begin to happen when there are more than five sales people.

The volume of revenue five or more salespeople generate starts to break the paper processes down. The day gets consumed by looking for lost paperwork, correcting errors and retyping data into different systems. What is needed at larger dealerships is automation that sits at the front end of the process and organizes the data in a way that a traditional accounting system can handle.

Such systems simplify dealing with configurable products by using a more generic grouping combined with descriptor techniques to create “sku’s” for the accounting system with the correct cost and sell amounts. Such systems reduce labor and product costs as well as improve financial reports.

In our next article we will thoroughly discuss the common paperwork and automation strategies for dealing with the configurable product challenge. We will review each process, discuss its pros and cons and then share with you how to implement our suggestions. In the meantime, if you have any questions or suggestions on what we should write about, feel free to contact me.

It is hypothesized that Plato used the story of Atlantis as a parody of a society exactly opposite of the Republic he lived in to help illustrate his political views.

So I figured I’d do something similar.

In my version, Cablantis is the opposite of the cabinet industry. It is a place where dealers only have to carry one manufacturer line (yet can adequately service every market segment). It is a place where manufacturers would never take business from the dealers by going direct to builders and dealers don’t have to go overseas to make better profits. But it is also a place of wonder for one other very important reason: dealers never have to re-key orders and the manufacturer receives all their orders electronically with no errors. Cablantis also happens to be a place where there is no such thing as a Nextel and dealer owners spend the majority of their time managing their businesses from the beach (even the ones that don’t have a son/daughter to take over the business for them).

We all know that Atlantis sunk into the ocean, so what about Cablantis? Well it hasn’t sunk at all. Not only is it a technological marvel, but it is rumored to exist somewhere near the Caribbean on an all-inclusive, resort-like island…

But Cablantis wasn’t always perfect. It actually started out much like our cabinet industry did.

Cablantis – The Early Years

There was no published standard on sku’s like there is today in Cablantis, so each manufacturer created their own systems with their own codes. The net result years later was that manufacturers all sold the same kinds of products but called them something different.

This created huge confusion for dealers in Cablantis’ early history because they usually carried more than one line of cabinets. So the only way the dealers could survive was to create paper to help deal with it all. And that they did. Boxes and boxes and boxes of it. And with paper came errors…by the boatload.

The Manufacturer’s Predicament

In an attempt to achieve electronic ordering with their dealers, manufacturers first started with design applications. But they soon found that routing orders from design actually forced dealer’s salespeople to redraw kitchens just to place an order. No matter what they tried, dealer’s salespeople preferred to walk to the fax machine to place an order.

After experiencing many problems with this approach, manufacturers went on to create their own ordering applications for their dealers. Each manufacturer created something slightly different and would get some dealers to try it.

But many dealers were more sophisticated and had trouble getting their staff to use these applications. The manufacturers didn’t understand this. After all, if the dealers would simply enter this information electronically, the manufacturer could cut costs, make more profit and offer better prices to the dealers. Certainly the dealers wanted this, so why weren’t they adopting?

It must be because some features were missing from their ordering software. So the manufacturers would add features here and there and try it again. Still the dealers resisted.

The manufacturers became frustrated. They spent millions of dollars to streamline their operations but the results were saddening. Many manufacturers even offered discounts to their dealers to use their ordering system. It still wasn’t enough. The panacea of electronic ordering with dealers was rapidly slipping away.

Since streamlining wasn’t delivering significantly improved margins, manufacturers looked to their product costs and contacted an island in the deep cold waters of the Atlantic. Chinartica was quickly becoming more sophisticated and was absolutely booming with population. They started making cabinets really cheap because labor was everywhere. Of course later they ended up eating all their ice, ruining their environment and making children’s toys out of lead – but that’s another story.

Chinarctica learned the ins and outs manufacturing quickly and partnerships were born.

The Dealer’s Predicament

We all know there’s always two sides to every story and in this case it was no different.

In an attempt to lower the costs of back office labor, dealers tried to implement design and accounting systems to gain efficiencies. No matter what they tried, their staff would become overloaded with paperwork and mistakes.

After experiencing many problems with this approach, dealers went on to create their own software for quoting and ordering – one single system to rule them all. Each dealer created something slightly different and would get some salespeople to try it.

But many dealers’ businesses changed too rapidly and they had trouble getting their sales staff to use these home built systems. Dealer’s management teams didn’t understand this. After all, if the salespeople would simply enter this information electronically, the dealer could cut costs, make more profit and offer better commissions to their salespeople. Certainly the salespeople wanted to make more money so why weren’t they adopting?

It must be because some features were missing from their home built system. So the dealers would add features here and there and try it again. Still the salespeople resisted.

The dealers became frustrated. They spent hundreds of thousands of dollars to streamline their operations but the results were saddening. Many dealers even offered incentives to their salespeople to use their home built system. It still didn’t work. The panacea of one system to streamline their operations was rapidly slipping away.

Then manufacturers began offering discounts to get them to order electronically. The dealers said, “I’ve got my own problems and each one of my suppliers wants me to do their data entry in their own ordering system – what are they smoking up there?”

Since streamlining wasn’t delivering significantly improved margins, dealers looked to their product costs and contacted Chinarctica.

Chinarctica learned the ins and outs of distribution and partnerships were born.

The Divergence

So the builders go to the manufacturers asking for better deals and the manufacturers have to choose to either go direct or lose the business. So manufacturers take the bait and build infrastructure to service the home builders directly.

The dealers get upset that business is being taken away from them. They also see the manufacturer direct prices as devaluing the services they provide in their channel. So to better compete, the dealers look overseas and begin undercutting the manufacturer direct prices.

And so it was that the path to The Divergence was set. Soon it would be a time of war and strife for Cablantis. A time of tough markets, tested loyalties and desperation in some cases.

So How Does the Story End?

Some say the manufacturers got their act together and took the time to understand the dealer’s predicament better and streamlined operations between themselves and their dealers to deliver huge value. Others say the dealers pulled in their product from Chinarctica and decimated the manufacturer landscape. And still others say the manufacturers put the dealers out of business permanently.

No one knows for sure, but one thing we do know: Cablantis ended up having a presence both on the manufacturer side and dealer side of things – with 100% electronic ordering. So the way I see it, markets always go in cycles. Dealers and manufacturers exist in every industry for a reason. It’s one of those things like rain and water, I guess. You need one to make the other. And even though you might get pissed at each other, there’s a bigger battle you should be preparing to fight.

Like textiles and furniture, the real unfortunate part was the billions of dollars which were wasted during The Divergence. While the manufacturers and the dealers were trying to out-maneuver each other, they became very distracted. Instead of banding together and streamlining their operations to compete with the rest of the world, they spent their time and energy working with Chinartica who quickly learned all the detailed tricks of the trade – from both the manufacturer and dealer perspectives.

So how did Cablantis become the panacea we know of and talk about today? Well that’s easy to see when you look one layer deeper: there is only one supplier and one dealer in Cablantis.

You see, Cablantis is owned by Chinarctica.