More and more national or “shed” KBB businesses are struggling.
I am not going to “name and shame”, we know who they are, but they all have their own issues in their own ways.
One common thread I do see is that accountants or non KBB people are making decisions on the best way forward for the business.
But are they best placed to be the main decision maker in these situations?
So, here is a hypothetical situation, partly based on various scenarios I have either witnessed first or second hand.
____________________________________________
A builders merchant runs a KBB section alongside its core business.
The KBB team is made up of a Showroom Manager, two Kitchen Designers, a Telesales/Lead Taker person, and an External Business Developer whose job it is to be on the road, build relationships and foster relationships with new and existing customers.
The company has 50 showrooms nationwide, and business is good.
Now, for whatever reason, it has been decided that money needs to be saved across the business.
Somebody looking at the accounts decides that between basic pay, commissions, cars, travel expenses and other costs, an External Business Developer is costing the business £80k per person.
Across all of the KBB category for that company, that is £4m.
So, the company accountant presents to the MD that they can immediately save £4m by no longer having any external sales people.
Perfect they all think, but there’s a problem.
Each External Business Developer was each bringing in on average £500k worth of sales, and when they were let go and went to work for the competitor, they took half of those customers with them.
That drop in sales has just cost the business £12.5m !!!
So now there is a different problem, a sales problem.
The business losing that sort of money now finds itself not being able to make investments into new displays, marketing or growing the business.
Before long, sales continue to fall and the decision is made that due to the lack of sales, there is no need for the Telesales / Lead Taker.
This comes with two problems.
Again, they lose sales as loyal customers have followed the Telesales person to their new company, but secondly, more strain is now being put onto the Kitchen Designers.
Suddenly, the designer is having to answer the phone, liaise with installers and deal with the day to day customers and suppliers.
The Showroom Manager is trying to be all things to all people and is slowly drowning in work.
Now the Kitchen Designers are demotivated as they are not being left to get on with their designs, and they too are leaving to go to the competition.
New designers are being recruited but they are being placed into a showroom where the phone is constantly ringing and the business isn’t coming in at a level they had been promised, and the earning potential isn’t there.
They are leaving and the reputation of the business is suffering and they are finding it difficult to recruit and retain staff.
Before they know it, the KBB area is a shadow of its former self, and they are fighting for the scraps from the table.
_____________________________________________________________________________
Sometimes, what looks like a “quick win”, can have massive long term effects on the business.
If you have a sales background, you can see this coming down the track and you do everything you can to protect your staff and your business.
If you have a non sales background, the immediate money saved seems so attractive that the consequences are pushed to one side to help make the decision more palatable.
I fear too many decisions these days are being taken with no real plan or strategy by people who don’t understand their businesses.
Yes, the problem is that the companies don't have any direction and then ends up having to react to the symptoms and not the root cause of the problems. Its a failure across the whole management team and action is taken to late. My view is that, you shouldn't be just cutting costs you need to make sure you get the right benefit from the costs.