KPI's? Sales alone does not make us sustainably profitable.

I've been in the industry longer than I even want to think about. Let's say more than 25 years. I've turned showrooms around to be profitable after years of struggling—increased Sales; and dropped OpEx without cutting. (like the uber-successful Marcus Lemonis, I do not believe you can cut your way to profitability)

This is not to brag, but to say I did all of this looking at the same stats I continue to see owners/CEOs/Presidents of showrooms continue to do.

The big difference is (1) It was a very different time (2) Could I have done even better had I known what I now know? (yes!) And I do!

Here's the problem. We continue to look at the same "good at the moment" statistics but not sustainable ones. After 22 years of being in my consultancy business and learning so much, I know these measurements must change. They need to show a sustainable business model and are currently built on the busyness of our clients and a house of cards.

We typically monitor some numbers only. But does that give us a holistic, sustainable overview of performance?

I no longer believe that. Here's what I always looked at.

1. Sales Goals - what have we done this week/month/quarter?

2. Profitability - are we maintaining a somewhat profitable showroom?

If neither was met, when I was in management, I pressured sellers to do more. That's exactly what I was taught. Sales made us profitable.

While I still believe sales can support a business, what is underlying produces sustainable profitability.

When that not-fun talk of "You're performance is off and sales are down" was given to me, I just went faster in the hamster wheel. That's because I was never taught how to SELL!

I was taught how to show products proficiently (but never given the HOW to build business - that seems to be the missing link).

So I called on more people and showed more products. When I was in a building, I would look at the roster for ANY semblance of a design firm to call on. I looked at lists of top design firms to spread a wider net. Surely, I would catch something! Or so I thought!

Does this sound familiar? Only now, we post, and post and post in addition. I see it all the time, even on this platform. Look at my new (fill in the blank).

I'm not saying we should stop any of this; I'm saying we need to start knowing what produces sales and measure the effort vs. the results!

That's where KPI's come in.

A key performance indicator (KPI) is a quantifiable performance measure over time for a specific strategic objective. (Source Qlik). Please notice the word quantifiable. I know from working with countless showrooms that most showrooms have the capability, and data may only be used to a limited extent.

Are sales goals a KPI? You betcha! But what's beneath those goals is an even more effective way to measure KPI; there is a reaction for every action.

There are ways to measure KPI for your salespeople (or if you are a salesperson) to measure your actions' effectiveness. Here are a couple of ideas.

1. How many actual sales are you garnering WHILE you are on a sales call? Did you prequalify even while making the appointment to see what you can bring? (and not "Can I bring you something? - too general) Are you making the best use of your time or primarily focusing on showing more products and giving more samples? GUSTO system lays out exactly how to have a more effective sales call, starting when you set the appointment up.

2. Do you look at your conversion rate once you give out a quotation? In my experience, a few of my clients (before I worked with them) measured conversion rates. If they do, they typically look at the wrong ones. Once they do, it usually hovers around 30-35%, which means the 65-70% of time spent on doing those quotations does not turn into sales. That's a ton of wasted time and increased OpEx!

3. How much time do you spend qualifying your client? Most sellers should prioritize ensuring the product is correct over getting it in front of clients. Typically, they focus on aesthetics, measurements, and (gasp) explaining why this product is amazing (I did it all the time!) more superficial things and do not get into what is VALUABLE to the client. If clients don't see value, there won't be a sale!

4. Inbound activity - Sellers are paid a commission for sales. In my experience, a seller's success often hinges on how busy the client is. I've found that this is often a major reason behind fluctuations in sales and profitability. Even RH sales were down in the first quarter. Retail always relies on inbound sales. If there's a scare in the economy, sales go down. (there are other reasons, too..read my last blog.)There needs to be a strategic plan for building the business, and sellers can even be rewarded for sales because they may have a hardy client list. I'm not suggesting sellers don't work hard (I know I did!) but are they taught to work smart? Hmm

So, owners/sellers/CEOs/Presidents, how can we start to secure a stronger hold on sales? We need to refocus on how we are measuring performances. That's KPI. (and by the way, one of my 7 Core Principles for Optimized Sales)

I wrote a book on building a sustainable showroom business called Leveling up with GUSTO, A Roadmap for Running a Sustainably Profitable Showroom. You can get your copy right here.

I'm available for a 30-minute conversation, too. Just click here to set up a time.

We can talk through some things you might be struggling with, and the worst, you leave with some great input that might help!