10 Ways to Increase Your Profit Margin

May 4, 2005

1. Stop laminating!
We laminated granite kitchens for years. Over time, we would get calls to fabricate 3cm product. We would talk the customer into laminating; however, the market forced us to start fabricating 3cm.
Once we learned how to handle the weight, it wasn’t such a big deal. Our profit margin increased, and the turnaround time on processing is half of what it took to flip a laminated job.
We push an edge we call the Demi Bullnose. (We jokingly call it, “the money edge.”) If you’re running a router, the profile is the top half of a 4cm Full Bullnose bit. This edge routs bullet-fast, and is much less annoying to polish than a full bullnose. On 3cm or 4cm stone the profile gives a nice, large presentation.
Selling 3cm is a no-brainer. The material is stronger, and there is no lamination seam. When we do laminate – rarely, these days – we charge an arm and a leg.
2. Inventory sinks!
I hope none of my customers read this.
We sell around 10-15 sinks per month. There are many suppliers of the imported sinks; when you purchase a pallet of stainless undermounts, you can expect to pay around $140 each
We sell them for $365 a pop! If you only sold 10, that would be a net profit of over $2000.
Think about this for a second. That is a bridge-saw payment, or half of a CNC machine payment. Can you say $24,000 dollars per year?
These are not name-brand sinks, and the finish may not be as good as some high-end name brands. We show our customers the difference, and most choose our sinks because they are saving some money.
We also sell sink accessories, these include the strainers and little grates that go in the bottom of the sink.
3. Inventory slabs!
This one can be problematic, but there are ways to accomplish this on a limited budget. This is how our shop got some inventory with no material budget.
We would sell a three-slab kitchen, and then cajole our supplier into selling us the bundle at a better price. After we did this a couple of times, we asked him if we could wait until we sold the slabs to make the payment.
Once we established the relationship, we would ask if he had any bundles of slab that he would like to “get rid of.” I asked him if we could show them in our shop and pay for them as we sold them.
The next step was logical … we started stocking his material in our shop on a consignment basis.
It’s a win-win scenario. It is much easier to sell inventory that you control. From the suppliers’ perspective, it stops you (and your customers) from shopping at competitors. The impact on your margin is dramatic.
Your company will be able to increase profits by:
• Having inventory on hand, saving the trip to pick up material from the supplier, and you having to meet the customer at his location;
• Gaining credibility with an in-house supply; and
• Efficiently utilizing material – the rems from one job are used to fabricate the next, reducing your waste.
4. Put prices on your remnants!
This one seems like a no-brainer, but it’s not. Most shops (ours included) never put prices on the remnants in the yard.
A client would walk out and say, “How much will you sell me this pretty red chunk for? It’s not very big … can you work me a good price?” Having just agreed on a $6,500 countertop deal, it’s hard to hit them with another whammy, so you tend to give ‘em a good deal. (That’s how it worked with me, anyway.)
When we hired our sales guy, he’d go nuts because he never knew what the rems cost. After a couple of months of being bugged to death, I broke down, went out to the yard, and priced all our remnants. I was annoyed about this and put pretty hefty prices on all of them.
A weird thing happened: We started selling remnants at the hefty prices. I’m convinced that pricing the slabs made the customer feel better, because they knew they were getting the same price as everyone else. Our bottom line got a little farther away from the bottom.
5. Sell cutting boards!
I know what you’re thinking. Well, think about this: Six Thousand Dollars, which is what we’ll make (gross) selling cutting boards this year.
This is how the cutting board game was played back in the day. We would install a $7,000 kitchen; having made the cook-top cutout, I’d hear the customer ask: “Mark, can you make me a cutting board out of that? How much will it cost?”
Hmmm. I now had a classic dilemma on my hands. I could answer:
• “Sure, Why would I charge you for that? I just made a ton of dough, so, yeah, we can knock that out.” (You have a VERY happy customer and a VERY broke fabricator.)
• “Sure, It will cost $50,” to which the customer says, “$50, ummm, OK.” (You have a Sorta Happy Customer, and a broke fabricator having to process a chunk of stone and take it back to the house at a later date)
• “Sure, It will cost $200,” after which the Customer rants, “What are you smoking? You crook!” (You have a grumpy customer and a fabricator who just lost a potential referral.)
There is a better way!
When we write-up contracts with clients, we include a box they can check. It states we will charge them $60 for a 12”X 18”cutting board if there is enough material to make it happen when we fabricate the kitchen.
More than 90 percent of our customers check the box and agree. (Everybody wants a 3cm 50-lbs. cutting board!) We crank it out as we process the kitchen and treat it like a component. The end result is a happy customer and a fabricator who just made a little extra dough.
7. Polish with warm water!
If you are fabricating in L.A. or Miami, this part may not apply to you. The rest of us who have to deal with cold weather should take some time to consider this.
I know many shops in my area that do not polish with warm water. I find that fact astounding.
We started polishing with warm water four years ago. My guys go right to work when they get to the shop; the first thing they do is run over and get the water flowing out of the polishers. On a cold morning, you can see towers of steam coming off the tools.
The crew works harder and longer without the need for breaks to thaw cold hands. The polishers never freeze. Happy workers equal more productivity. And, I think (I have no scientific data to back me up) the diamond resin pads work better with warm water.
Looking to cost-justify the expense with productivity gains? A $150 water heater can pay for itself in two days.
8. Sell exotic stone!
This is something that shops on a budget may have to put off for a while.
Most of our inventory is “exotic” material. Since we no longer laminate much and don’t deal with book-matching, the cost to process exotic material is about the same as processing Uba Tuba. Our mark-up on exotic material is pretty large.
Exclusivity has its advantages. Customers come to our shop and fall in love with a stone that you know they can’t find anywhere else; you’ve stopped the shopping and dickering cold. They use you, or pick something that isn’t what they “really” wanted.
I know for a fact that we get more referrals from a perfectly installed exotic kitchen then we do from a perfectly executed basic kitchen. And, the most-profitable thing you can do in any business is generating word-of-mouth referrals.
9. 2cm eased edge!
Amongst our large inventory of exotic materials, we stock four colors of inexpensive 2cm material. When we get a customer on the Budget from Hell, we still can make money and close the deal.
We offer what we jokingly refer to as the “budget gourmet kitchen.” We sell a two-slab job in the $3,500 area, with no backsplash, a surface mount sink and a 2cm eased edge. Our hard cost is under a grand, and we can pump out one of those in a day.
On several occasions, we fabricated and installed on the same day. If you can squeeze these types of jobs into your schedule, you can make some good money.
10. Photograph your work!
And, build a simple Website. I’ll devote an article about this topic in the near future.
Till next time…Mark Lauzon, stonecutter
Mark Lauzon is a fabricator in Oregon and the Administrator of www.stoneadvice.com, a Website dedicated to slab fabrication.