Richard Glikes on Making Money in CEApril 23, 2014 By Richard Glikes
This column ran in the most recent issue of Azione Unlimited's member newsletter, and is republished here with permission.
The number one written goal of Azione Unlimited is, “Deliver exceptional profits to members to ensure their long term success.” Let’s engage in a short discourse on how to make money in this industry. Here are some ideas:
2. Take every cash discount. Generally they average about 3% to 4%. It’s all pure profit and vendors love, yes love dealers who pay their bills on time! A good net profit in our industry is usually about the same as the cash discounts. After you pay everyone including yourself and Uncle Sam to net 4% is good.
3. Avoid purchasing from distributors whenever possible. They have to make money too. Generally they work on 6% to 25% margins. That’s your money if you buy direct. TVs are the exception.
4. Control your expenses. Sounds simple doesn’t it? Check at least three places for all your miscellaneous purchases like office supplies, uniforms, and insurances. Pit one against the other just like clients do to you.
5. Measure the productivity of every employee. Are you hitting the $200,000 in sales to employee ratio? Divide your total sales by the number of employees. If that number is under $200,000, you’re probably losing money or barely earning some. Over $200,000, you’ll be doing quite well.
6. Raise your labor pricing. Everyone seems to be maxed out on available labor. Scarce resources demand higher pricing. So charge more for it. Electricians and plumbers know how to make money of labor, why can’t we?
I could go on and on but I will come to the punch line right now. The people who made the most money in CE did it in real estate not by moving boxes in and out of doors. So buy your building and do it now. Rents should be 4% to 5% of sales. Why not pay that money to yourself? Real estate appreciates and mortgages can be fixed in todays’ dollars with inflation making this expense less over the term. In time the building is paid off, you can rent it to yourself and all the while it has gone up in value. This could likely be your retirement nest egg.