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Floor Covering News Distributor Perspective
(June 2007) --
Benchmarking: How to Make Statistical Analysis Accountable
By Maurice Desmarais
Everyone talks about running a lean operation, however very few are strong enough to look the statistics in the eye and become certain their business is in shape.
Members of the North American Association of Floor Covering Distributors (NAFCD) recently submitted their business statistics for its NAFCD Performance Index and Benchmarking Guide, the association’s annual profitability study of participating members. The study offers business owners a check-point on exactly where his or her company stands in the market.
We learn a number of things from this valuable study every year. For example, in 2005, profit results for high-profit floor covering distributors hit a five-year peak. The 2004 study revealed that high-profit distributors make more money because they control gross margin and expenses. Participating members learned a wealth of other information from the survey and frequently encourage other members to participate.
The profitability study provides NAFCD members the best industry-specific data available to direct the budgeting and financial planning process. Participating members complete a confidential survey about their businesses and submit it to the Profit Planning Group of Boulder, Colo. The Profit Planning Group is an independent research and executive education firm which conducts profitability research for more than 100 different trade associations, in addition to NAFCD. The research firm forms an aggregate with other respondents and analyzes the data in terms of sales size, line of business, and the like. It is a wonderful tool for those business owners who take the time to submit their numbers in this confidential process.
For their effort, participating companies receive a detailed, 25-page report that compares their company with similar firms and provides suggestions for improving the firm’s profitability. Participants in this year’s study should receive results later this summer. NAFCD members take the time to put the information together and take advantage of the top flight analysis the association provides because this process amounts to more than numbers. It offers a concrete plan of action.
Members learned from previous surveys that achieving a new high in profit could result in part from changing the product mix to include higher-profit items. The firms that wanted to achieve higher profits had the opportunity, thanks to participating in the study, to identify exactly how successful companies produced superior results.
While no firm does everything well, according to Dr. Albert Bates, founder and chairman of the Profit Planning Group, the high-profit firms typically generate better performance on the few factors that really count. Across a wide range of industries over the last 25 years, Dr. Bates once commented, three measures continually appear at the top of the list of factors that must always be the focus of management attention:
Sales growth, gross margin and payroll expenses.
None of these aspects can be studied effectively without statistical analysis.
It is difficult to gather the numbers and analyze them yourself. It can require some outside assistance. NAFCD was willing to take on this role for its members. In turn, NAFCD members are willing to take on this role for their retail customers. Using the process of statistical analysis, NAFCD members can better serve their retail partners because of what they have learned. We can assist our retail partners in understanding the numbers in your retail market and help find solutions.
Numbers alone will not bring success. The willingness for review and persevere to affect change and action leads to success.
Maurice (Moe) Desmarais is Executive Vice President of the North American Association of Floor Covering Distributors (NAFCD). To contact him, please call 312-673-6836, email: mdesmarais@smithbucklin.com.
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