HARRISBURG, SD — Showplace Cabinetry, the Harrisburg, SD-based cabinet supplier, has completed a 16,800-sq.-ft. project linking its two manufacturing plants, the company announced.

The $2.5-million expansion provides a central shipping point for Showplace’s framed cabinetry and frameless cabinet lines, as well as enhanced warehousing and transportation efficiencies companywide, company officials said, adding that the project effectively increased Showplace’s production capacity by 30%. The project also streamlines logistics and handling, increasing shipping capacity for the company and creating a more efficient order flow from production to transportation.

“Demand is up for all our cabinetry lines,” said Bill Allen, Showplace Cabinetry president and CEO. “That demand required us to find an innovative solution to improved logistics and enhanced ShowplaceEVO production. The new warehouse and shipping link solves both challenges.”

“This new expansion gives us the space we need to take our quality production and customer service to the next level,” Allen observed.

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I have always had a burning desire to know how my business measured up to industry peers. Were we above average, middle of the pack or a bottom feeder?

Years ago, while moderating a workshop at KBIS, the workshop presenter invited me to join an industry-specific peer group that he was facilitating. Sensing this is where I could gain some perspective about my business, I accepted the invitation.

My first meeting had me sitting around a boardroom table with owners of eight other kitchen and bath businesses from different geographical areas. The format was simple: sharing information, issues and challenges, and poring over each other’s financial statements.   

I arrived at this meeting confident, perhaps even a bit cocky; I knew my numbers. The feeling didn’t last. My peers were starting to ask rapid-fire questions about the financials. I found myself struggling to provide satisfactory answers. Embarrassment and insecurity quickly replaced confidence.

That experience taught me several things. Primarily, I need to spend more time with the financials to understand the relationship between the numbers and the information revealed, and that most kitchen and bath dealers/owners don’t fully understand the importance of their financial statements. The latter is because most have grown up on the design and selling side of the business.

As a business owner, it’s critical to comprehend and own the financial side of the business; otherwise, you may never realize the company’s full income and profit potential. While accountants and bookkeepers play an essential role, it’s the role of owners to learn the meaning of these financial statements and determine what should be done to improve company performance.

So, a little primary education in this arena will set the stage for understanding the crucial values derived from knowing what your financial statements are saying about the state of your business.

The Difference in Financial Statements

Financial statements are divided into three categories: Income Statement (also known as a Profit and Loss Statement), Balance Sheet and a Cash Flow Statement.

An Income Statement measures your company’s financial performance in the current year. It’s measured by how much revenue (sales) has been recorded versus how many expenses have been incurred to generate that revenue level; the difference – revenue minus expenses – is called Net Profit.

A Balance Sheet measures your company’s cumulative performance since the inception of the business. It’s measured by how many assets you have acquired over these years minus the liabilities incurred in the process; the difference (Assets – Liabilities) is called Net Worth. The net worth is derived from several components: initial capital, retained earnings and the current year’s net profit, which is the common link between the Income Statement and the Balance Sheet in any given year.

Cash Flow Statements provide a summary of how cash enters and leaves the company. It measures how well a business manages its cash. Cash is king. Cash is the lifeblood of any business, and how well it’s being managed needs to be documented.

Cash and Accrual Accounting

There is a significant difference between cash and accrual accounting, and not knowing the difference and its impact on a business can lead to severe consequences. The main difference between the two types of accounting is when revenue and expenses are recognized and recorded.

Cash Accounting records revenue when cash is received. A 50% down payment on a newly signed kitchen would show up as revenue on the income statement. With no expenses to record yet, the financials could reveal a sizable net profit. The pitfall for this kind of accounting is that it might overstate the health of the business. Under this scenario, the company could be cash-rich, lulling the owner into a false illusion that the business is profitable when in reality, the business may be losing money.

Accrual Accounting recognizes and records revenue when it is earned. Revenue recognized upon delivery of a product or service aligns with the associated expenses and services provided.

The accrual method provides a more accurate picture of the business’s overall health by including all revenue when earned and all expenses when incurred. This more accurate financial data places an owner in a better position to make sound business decisions and limits the risk of overpaying taxes.

Managing by Percentages

Managing a business by reviewing and looking at strictly numbers can be challenging. It can be easy to overlook a change in revenue or an increase in expenses when focused primarily on the numbers – or, worse, not knowing what the numbers mean. It also makes it difficult to compare one financial statement to another or understand the changes occurring over time.

A more straightforward method to manage is inserting a column into a financial statement where any line item amount is expressed as a percentage of the overall net revenue. Total revenue is listed as 100%, and cost of goods, gross profit and all other line items are expressed as a percent of the total revenue. This method makes it easier to analyze the performance of a business over time and compare it with peers or industry benchmarks.

Benefits of Knowing Your Financials

Your financials tell a story about your business, what is occurring at the moment, and a telling tale about your organization’s history. It’s important to be adept in reading, interpreting and using your financial statements as a guide to making wise business decisions.

There are many benefits to being financially savvy. First, you can protect yourself from possible embezzlement. Placing all your trust in a bookkeeper without having financial know-how creates exposure that is often hard to overcome.

Second, you can better measure your financial performance against others in a group, identifying weaknesses where your business can improve. Third, you can ask better questions of professionals so you can secure better advice. Fourth, you can set more intelligent and realistic goals. Fifth, you can furnish more confident leadership, attracting and retaining quality personnel. And sixth, knowing the financials like you know the designing of kitchens can make you a lot more profit!

Commit to gain a deeper financial understanding of your business. Invest in yourself to learn the financials, and the story conveyed. Financial knowledge comes with reward – realizing the full profit potential of the business and leveraging it appropriately.

Dan Luck owns Bella Domicile in Madison, WI. He has been an SEN Member since 2002 and has led the SEN Leadership Team since 2018. Visit sendesigngroup/education for more information. Dan welcomes
questions and comments at [email protected].

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HACKETTSTOWN, NJ — The kitchen and bath industry is expected to post strong growth in 2021, although the pace of that growth is apparently cooling, according to the latest Market Forecast Report issued by the National Kitchen & Bath Association.

According to the second, and final, update to the NKBA’s 2021 Market Forecast Report, the industry is expected to register “healthy, double-digit gains over 2020,” although the latest forecast has been “pared back a bit” compared to the previous (July) forecast – due largely to ongoing supply-chain disruptions, labor shortages and higher material costs, the NKBA reported.

The NKBA’s final 2021 Market Outlook, released early this month, projects full-year revenues of $167 billion, a 19% increase over the $141 billion posted in 2020. The new forecast, however, represents a modest downtown from the July Market Outlook, which pegged year-end 2021 revenue totals at $171 billion.

“This year has been like none other for our industry, as strong growth across virtually every sector has led to record revenues,” said Bill Darcy, CEO of the Hackettstown, NJ-based NKBA.

However, “some homeowners, faced with price increases related to supply chain shortages, are deferring projects until they have enough saved to get exactly what they want, or in the hope that costs will come down,” Darcy added.

The NKBA’s latest forecast projects a nearly 10% year-over-year growth in the kitchen and bath remodeling sector, and a 26% growth in new construction. Premium projects are expected to be up by more than 22% – although down from the 28+% forecast in July – while low-end projects will grow under 11%, “suggesting a cooling of the DIY trend,” the NKBA said.

“These findings are very encouraging and indicate that not only will we close out this year on a solid note, but the growth should be sustained into 2022,” Darcy observed.

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WASHINGTON, DC — With builders continuing to grapple with lumber price swings and supply chain disruptions, the National Association of Home Builders has once again appealed to the White House to redouble its efforts to address lumber price volatility and address supply chain bottlenecks for lumber and other building materials.

The Washington, DC-based NAHB this week sent a letter to President Biden, requesting that government officials address three key issues that, if unaddressed, “will severely hamper the ability to provide affordable housing and provide jobs to strengthen the economy,” said the association, which has already conducted several meetings on the subject with top administration officials.

“While lumber prices have fallen precipitously since peaking in mid-May, prices have been moving upward over the past month,” said the 140,000-member NAHB, urging the Biden administration “to make it an important priority to address lumber and building material supply chain issues that are contributing to price volatility and harming housing affordability.”

The NAHB urged U.S. officials address the current congestion at the ports and to “return to the negotiating table with Canada and develop a new softwood lumber agreement that will end tariffs on lumber shipments into the U.S.”

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HACKETTSTOWN, NJ — The National Kitchen & Bath Association has unveiled its Thirty Under 30 Class of 2022.

The program, currently in its tenth year, recognizes talented kitchen and bath professionals under the age of 30. Nominees were evaluated on their career or educational achievements, commitment to excellence in the kitchen and bath industry and leadership within their organizations, according to the NKBA.

The 2022 Class includes: Jessica Bolles, Oasis Showroom/APR Supply, York, PA;  Michael Boone, Green Forest Cabinetry, Chesapeake, VA; Andrew Converse, Moen, Cleveland, OH; Alex Dickson, PK Brand Management, Kelowna, BC, Canada; Darla Duncan, Prime Cabinetry, Kennesaw, GA; Hannah Guilford, Heart & Hammer Homes, Fryeburg, ME; Cara Hansen, Triple Dot Design Studio, Vancouver, BC, Canada; Jesse Jarrett, Jarrett Design LLC, Emmaus, PA; Becky Leu, Leu Interiors, Des Moines, IA; Andrea Liston-Jones, Liston Design Build, St. Charles, MO; James McDonald, McDonald Contracting, Arlington, MA; Madelaine Millholland, CASE Design/Remodeling, Bethesda, MD; Basia M’Pinda, Kohler/Williams & Associates, Winnipeg, MB, Canada; Antoinette Nunez, CKBD, F&J Builders, Wilmington, DE; Hannah Pregont, Superior Marketing, Brooklyn, NY; Megan Reed, AKBD, CLIPP, Beyond the Box Inc., Billings, MT. and Kelsey Richter, BDA & Associates, Fishers, IN.

Other Class of 2022 members include: Caitlin Ryan, Fisher & Paykel | DCS Experience Center, New York, NY; Grace Sheehan, CLIPP, Kitchen Doctors, Midlothian, VA; Justyna Skolasinski, AKBD, Crystal Lumber, Crystal Falls, MI.; Amanda Slattery, Artistic Cabinetry, Jackson Lake, NE; Benjamin Stoler, Delta Faucet Co., Indianapolis, IN; AJ Tentler, Delta Faucet Co., Indianapolis, IN; Summerlyn Travis, Strohmaier Construction, Spokane, WA; Hannah Triebel, Sunnyfields Cabinetry, Baltimore, MD; Austin Waldhauser, Kenwood Kitchens, Columbia, MD; Emily-Anne Walker, Ferguson Enterprises, Williamsburg, VA; Patience Whipple, Chariot Plumbing Supply Design, Sandy, UT; Pip Wu, D.I.D, Ferguson/Wolseley, Burnaby, BC, Canada and Shantelle Yablonski, Superior Cabinets, Saskatoon, SK, Canada.

The incoming class will be formally inducted during KBIS 2022 in Orlando, FL, according to the NKBA.

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WASHINGTON, DC — Architecture firms, including those focused in the residential sector, continued to report increasing demand for design services in September, according to a new report issued by the American Institute of Architects.

According to the Washington, DC-based AIA, the association’s monthly “Architecture Billings Index” (ABI) score for September was 56.6, up from August’s score of 55.6. Any score above 50 indicates an increase in billings from the prior month, the AIA said.

“The ABI scores over the last eight months continue to be among the highest ever seen in the immediate post-recession periods that have been captured throughout the index’s history,” said AIA Chief Economist, Kermit Baker.

Baker cautioned, however, that it’s “unlikely that revenue increases at architecture firms can sustain this pace.”

“Given that growth in both new design contracts and project inquiries have moderated in recent months, we expect to see a similar path for the ABI,” Baker said.

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WASHINGTON, DC — Strong consumer demand helped push builder confidence higher in October despite growing affordability challenges stemming from rising material prices and shortages, the National Association of Home Builders reported.

According to the Washington, DC-based NAHB, builder sentiment in the market for newly built single-family homes moved four points higher to 80 in October, according to the latest monthly NAHB/Wells Fargo Housing Market Index (HMI), released this week.

The NAHB also reported that single-family housing production held steady in September, at a seasonally adjusted annual rate of 1.56 million units, as strong demand helped to offset ongoing building material supply chain disruptions.

“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” said NAHB Chairman Chuck Fowke.

“Builders are getting increasingly concerned about affordability hurdles ahead for most buyers,” added NAHB Chief Economist Robert Dietz. “Building material price increases and bottlenecks persist, and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of U.S. Treasuries and mortgage-backed debt.

“Policymakers must focus on fixing the broken supply chain,” Dietz observed. “This will spur more construction and help ease upward pressure on home prices.”

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PALO ALTO, CA — Businesses in the residential construction and remodeling sectors anticipate “strong activity” through the balance of 2021, although many companies report steady increases in backlogs since the beginning of the COVID-19 pandemic, along with wait times of nearly three months before new projects can begin.

That is the key finding of the Q4 2021 Houzz Renovation Barometer, a quarterly gauge that tracks market expectations, project backlogs and recent activity among U.S businesses in the construction and architectural/design services sectors. Results of the survey were released this week by Houzz Inc., the Palo Alto, CA-based online platform for home remodeling and design. The survey was fielded Sept. 28 through Oct. 8th, the company added.

“Confidence prevails across the industry through year-end, despite the ‘Expected Business Activity Indicator’ dipping slightly compared with the very high level posted last quarter,” said Marine Sargsyan, Houzz senior economist.

“We’ve seen some settling of home renovation and design activity following record high performance earlier in the year,” Sargsyan observed. “Yet many businesses are struggling to catch up with heightened demand as they navigate supply chain challenges and labor availability, leading to record-long backlogs.”

More than half of surveyed firms in both the construction and architectural and design services sectors report challenges with product and material shortages and increased costs as of the beginning of Q4, Houzz said.
While only half of businesses anticipated heightened costs for raw materials – such as lumber, copper, steel, plastic, and aluminum – more than two-thirds reported that these materials actually increased in cost over the past quarter. More than nine in 10 construction businesses reported moderate to severe skilled labor shortages, Houzz added.

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WASHINGTON, DC — A pair of prominent industry-related trade associations have issued pleas for Congress and the Biden administration to help ease global supply chain bottlenecks that are stunting housing affordability and hindering the availability of key products used in new construction and residential remodeling.

The National Association of Home Builders (NAHB) and the Association of Home Appliance Manufacturers (AHAM) last month each issued separate calls for government policymakers to eliminate current trade barriers and seek solutions to port congestion and major delays in truck and rail transportation.

Testifying before the House Small Business Subcommittee on Oversight, Investigations, and Regulations, NAHB Chairman Chuck Fowke told government lawmakers that disruptions in the building materials supply chain exacerbated by the COVID-19 pandemic are having “a disproportionate” impact on smaller homebuilding firms.
“Without large economies of scale, small businesses generally cannot negotiate bulk discounts on lumber and other key building materials,” said Fowke. “The effects of this uncertainty trickle all the way to the (prospective) homebuyer, many of whom have balked at projects due to unexpected price increases.”
According to the Washington, DC-based NAHB, historically high lumber and building materials prices continue to serve as “headwinds” for the U.S. housing sector, significantly impeding housing affordability.

“From steel mill products and plastic piping to cooper pipe and wood windows and doors, prices are up dramatically year-to-date and are exacerbating the growing housing affordability crisis,” Fowke said. “Until a long-term solution can be reached, Congress and the administration should temporarily suspend duties on a wide array of imported building materials and goods, from Canadian softwood lumber to Chinese steel and aluminum.”

In addition, “policymakers must continue to aggressively explore solutions to ease building material supply chain disruptions that are causing project delays and putting upward pressure on home prices,” Fowke added.

Days before Fowke’s plea, AHAM joined several other trade associations in telling Congress that ongoing supply chain challenges “are hurting the competitiveness of U.S. manufacturers, stalling the economic recovery (and resulting in) unprecedented damage to the global product supply chain.”

“The ability to produce and deliver home appliances to consumers has been dramatically hindered by the COVID-19 pandemic and other supply-related issues, creating hardships for consumers and businesses at every step in the supply chain,” said Joseph McGuire, AHAM president and CEO. “The result is ongoing shortages of products, materials, components and labor, leading to delays and increased costs.”

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