Wendy Outlaw, the installed sales coordinator for Builders Supply Co., a single-location dealer in Lancaster, S.C., recently took her 80-pound English bulldog on a job-site visit, warning the builder's superintendent that if he didn't buy installed windows, doors, and mill-work from her she'd sick the pooch on him. For that, Outlaw got a laugh—and a sale.
While Outlaw's tactic may not be the preferred or prevailing way to build installed sales revenues (and it was certainly tongue-in-cheek), it is symbolic of a new aggressiveness among dealers in their marketing and selling of the service to pros. “Dealers used to feel forced into it and really didn't know how to approach it,” says installed sales consultant Mike Butts, president of LBM Solutions in DeWitt, Mich., and a PROSALES contributing editor (see page 44). “Now, they're willing to go after installed sales to increase market share, sell more of the housing package, and protect their accounts. It's a 180-degree shift.”
The numbers back him up. Among the 2005 PROSALES 100, 73 of the top 100 dealers offer at least one installed sales (IS) category, a 9 percent boost in two years. Specific categories (cabinets, framing, and mill-work, for instance) have seen double-digit jumps during that time, while others—such as “post-paint” installations of closet shelving, mirrors, door hardware, and bath accessories—have emerged or are being packaged to leverage greater sales and profits.
Dealers also are getting smarter about how they manage installed sales, such as recognizing the value of a manager or coordinator dedicated exclusively to the effort, adequate and patient financial backing, market-driven decisions of what categories to offer (or to package or not offer at all), and hiring practices for labor based on sustained sales and concerns about liability instead of personal preferences or past company policies. “Dealers are now taking a long-term approach to [installed sales] success,” says Jim Enter, president of the American Association of Roundtables in Murrells Inlet, S.C., who facilitates groups of dealers in three geographic markets twice a year regarding their installed sales programs. “This is not a ‘magic wand' business, as much as many dealers want it to be.”
Not So Simple There may not be a magic wand to installed sales success, but there is a magic number ... at least among the 24 pro dealers that make up Enter's semi-annual installed sales roundtables, all of which offer the service in at least one category. According to Enter's findings, among the 15 dealers that netted $1 million or more in IS revenue in 2004, all but one of them is profitable—the best banking 17.34 percent net profit against $1.73 million in net IS sales, and all of them earning double-digit gross margins. Of the remaining nine dealers below the $1 million sales threshold, only two operate profitable programs (each a modest 6-plus percent), only one other has a double-digit gross profit, and one is operating 29 percent below the net profit line.
Why the million-dollar water mark? Simply, Enter says, higher sales volume spreads the fixed expenses of direct labor and administration (on average, between 28 and 32 percent of sales combined, he estimates) across a broader ledger, enabling dealers to more easily leverage sales success into profitability.
What isn't so simple is getting to and over that $1 million sales hurdle—or at least making more than enough sales revenue to cover fixed costs. Both consultants and dealers familiar with the installed sales concept agree that IS success is a complex combination of market savvy, dedicated financial and human resources, a streamlined operation, and a willingness to trial-and-error the effort before gaining a foothold in the market.
Thanks to a more established industry track record, there's a lot more information out there about benchmarks and targets for IS programs, says Butts. “Dealers know better about what sales and profits they should and want to achieve,” he says. “They go into it managing it as a profit center instead of as a service without profit as the primary motive.”
People First Although installed sales success requires a multifaceted formula, those in the know say it begins with people. But even dedicating a manager to the program (as opposed to adding it to an existing manager's already-full plate) isn't enough. “You have to hire attitude,” says Roy Burleson, director of builder solutions for Guardian Building Products Group in Greer, S.C., a national building materials distributor with established installed sales programs in 12 categories available to its dealer network. “The right person has to focus on customer service instead of a paycheck.”
That being said, Burleson adds that dealers do need to pony up the dough for the right IS manager, even if it means existing managers might make less. “It's a different job [than a store manager or yard foreman],” he says. “On an hourly basis, the installed sales manager probably makes less, anyway.”