Closet companies: Use your levers and dials

Photo By Pexels/Robert Kso

Owning your own business can be hard! Running your business can be frantic! Managing a business seems to have too many moving parts!

I like to try to keep things simple, and part of what helps me is visuals. Some of you may remember my last article, “Scheduling is like making sausage,” the article on “My marketing pyramid,” or maybe “Are you playing Whac-A-Mole?” I learn through examples that help teach and explain. 

Years ago, I saw a fire engine up close and was amazed at the number of levers and dials to control it. Over time I began thinking of my business as having just a few levers and dials. 

To begin looking at your business, you must identify the levers in your operation. Those areas consist of activities you do, money you spend, products you offer, and services you perform, all of which need your decision to turn the lever on or off.

For example, I started selling and installing wire shelving in the closet business in 1988. I turned that lever on, and over the years, I turned on other levers, like melamine, garage organization, advertising through Money Mailer, and so on. Some levers I turned on and then later decided to shut down, like selling and installing garage doors and using Money Mailer. 

Now, let’s move on to dials. I decided to continue to spend money on advertising but adjusted from Money Mailer to a high-end magazine focused on the home, which was subscription-based in my service area. I did that for a year and adjusted the lever and dial by increasing the amount I spent on advertising and adding a direct mail postcard campaign to the magazine subscription.

Another example of how best to use your levers and dials is by looking at your finances. We all spend money on materials, that is the lever.  The dials are things like where you buy your material or in what quantity you purchase].  Adjusting those dials while at the same time adjusting the dial that reflects what you sell that material for can have a larger impact than you might think.  For example, if you lower the cost of your material by 3% and increase your selling price by 3%, that will give you an additional 6% profit. If you have a $1 million business, adjusting two of your dials will amount to $60,000.

Another area of levels and dials to consider involves how you pay your installers. We all have opinions on how to pay an installer; some pay hourly, some prefer piecework, and some are based on a percentage. Some of us inherited these levers and dials, which has become a habit. Others may have allowed certain installers to dictate how they want to be paid. Or some of us decided based on looking at the market rate for installers, developing our selling price based on that market rate, and then looking for and hiring installers who met those requirements. However you have decided to choose to pay, my point is that there are dials that can be adjusted and fine-tuned in all areas of your business.

Selling price

This dial can be adjusted by many factors, such as whether you are the only salesperson or whether you have a staff and need to have standardized selling prices. You can adjust the dials by colors, textures, accessories, proximity to your office, and job size.  You can also adjust by repeat customer or new, wholesale or retail, and, of course, what profit you want to make.  You see, you have many more dials that you can turn to determine what you sell a job for.

Cost of material

The levers and dials here involve asking questions like whether you make the material yourself, buy the machines and rent the space, or whether you buy from a supplier. Do you buy direct from a manufacturer or a distributor? Are shipping and freight pre-paid? If so, that could cause you to spend and tie up cash by buying too much if you can’t sell it within a month or two. Do you buy your hardware from an online seller or a supplier that specializes in our industry? All of these questions become the levers and dials that can lower your cost, allowing you to lower your selling price or keep it the same and increase your profit.

Cost of installer

Not only answering the question of “how” are they paid, but also reviewing the other dials, like do they provide their own truck and tools? Or do you? Is the expected time it will take to install being achieved? Or does it take longer or shorter, in which case you need to learn and adjust that dial.

Cost of shop labor

How does your labor work? How fast do they work? Can they work faster if given different tools? When I started selling melamine closets, I had to attach the handle to the drawer front. I would use my tape measure to find the center, then measure out where to drill the hole … it was very time-consuming! Then I saw this plastic template for $8, which saved me a lot of time. Then I found a $350 adjustable jig that made it even faster and more accurate. 

Selling costs

Included in selling costs are commissions, as well as marketing & advertising, website, SEO, social postings, professional photography, etc. Each is a lever to turn on or off or a dial to adjust. This can be one of your best or your worst adjustments. Think of each of them as individual dials – but all on the same control board – that will help you visualize your job of fine-tuning and adjusting, all while keeping a record of what you are doing so you can gauge your success.

General & administrative

One of the big lever questions is: Do you move your business out of your house and get a space to operate your business? The dial aspect considers whether you should rent or buy. And do you rent in an industrial park, or on a main street? Do you have a showroom or just a shop with offices? These are all part of adjusting the dial.

In this article, I hope to help you look at your business as a series of large and small decisions. Believe and see that you can turn on or off and adjust up or down all of the many areas we each address daily. 

 

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About the author
Tim Coleman

Tim Coleman is branch manager of SCE Unlimited Chicago, a div. of IBP. Coleman founded his closet organization company in 1988 and ran it successfully for nearly 30 years. In October 2020, he took the helm at SCE Unlimited, which offers wire and wood organization systems, hardware and accessories.