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 SALES ADMINISTRATION OPERATIONS FINANCE

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

Customer NameCustomer Expectation Score 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 GOALTASK/OBJECTIVETIME 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 GOALTASK/OBJECTIVETIME 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 GOALTASK/OBJECTIVETIME 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 GOALTASK/OBJECTIVETIME 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 GOALTASK/OBJECTIVETIME 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 PLAN Name Date Top Ten Hot List/Close/DollarsTop Ten Target List Lead Sources Prospecting Plan 30 Day Booking Forecast - 30 Day Billing Forecast -

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS ACCOUNTVENDORBOOKING MONTH $’S BOOKED GP% / $’S BILLING MONTH $’S BILLED GP% / $’S ABC, Inc. United1. Nov.40,00034/ Nov.*20,00034/6800 Hon2. Dec.15,00028/ Dec.40,00034/13600 Seatability3. Jan.6,00035/ Jan.15,00028/4200 Cowabunga United1. Nov.32,00031/ Nov.*9,00035/3150 Global2. Dec.27,00033/ Dec.32,00031/9920 Kimball3. Jan.19,00025/ Jan.27,00033/8910 1=CURRENT MONTH 2=NEXT MONTH 3=MONTHAFTER NEXT $ TOTALS: $ TOTALS: $ TOTALS: $ TOTALS: * Represents booking from previous forecast.

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS

STRATEGIC PARTNER OR ABUSIVE MATE? SELECTING YOUR PRIMARY VENDORS

YOUR DEALERSHIP’S FURNITURE PROFITABILITY METRICS PRIMARY SECONDARY TERTIA RY

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 Service Labor - 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