Fenestration hallucination: Increase your profit margins!
This week, glassblog introduces “Fenestration hallucination,” a quarterly blog addressing industry, management and sales issues, written by Rod Van Buskirk, president of Bacon & Van Buskirk Glass Co.
“The successful man will profit from his mistakes and try again in a different way.”
Fear and ignorance have ruled the fenestration industry for decades. Most companies in our industry don’t do what good salespeople should: follow up with customers to find out what is really happening in the marketplace, in order to maximize profit. Instead, we’d rather drop price quickly to build sales, and ignore our margins.
Mirror is the same price per square foot now as it was when I came into the business 35 years ago. Major glass fabricators’ production volume has returned to 2008 levels, but their margins are cut in half. Glaziers have a long history of marginal profitability. As far back as 2001, an annual surety survey comparing the profitability of all construction segments indicated every segment that year saw a 3 percent to 5 percent increase in profitability, except two trades: excavators and glazing subcontractors.
No doubt you’ve reduced your overhead as far as you can. It may seem counter-intuitive in this tough marketplace, but do your market research and raise your profit margins now. If you do your homework, you might find the market can bear more than you realize.
You lose when you chart a “break-even” strategy. Most of our industry is facing reduced long-term sales volume and ever-increasing employee overhead. The bankruptcies and consolidations in our industry point to the failed strategy of seeking gross-profit volume over per-employee net profitability.
Changing values, changing habits
One key reason why you’re able to raise profit margins is that the downturn has changed the way Americans value their purchases.
We all have less money now, so every dollar matters more to us when we do spend it. Within three short years, saving and spending patterns in this country have radically changed. Retailing nationally will never be the same.
Thus, our buying habits have changed. While overall consumer spending is down, when considering a sizeable purchase, Americans are now actually willing to spend more if they perceive that product or service will be better, higher quality, last longer, etc. When we do spend that precious dollar, we must get more from it.
So sell ‘up’! Meet the new demand for higher quality. Sell quality products and personal service, and your customers will likely pay that extra amount. You can make more on what you do … but you must deliver higher value to keep that repeat customer.
“Profits, like sausages... are esteemed most by those who know least about what goes into them.”
Rod Van Buskirk is the third-generation owner of Bacon & Van Buskirk Glass Co., with locations in Champaign and Springfield, Ill. A past NGA Chairman, Rod looks quarterly at the industry from the middle of nowhere, steals ideas from anyone he can and pretends to know what he’s talking about. Rod invites your comments as you are certainly smarter than he is.