Managing director of buying group MHK-UK Marcel Crezee provides clear advice for KBB retailers on how to react to the uncertain climate, including  rising costs

Purchase prices are rising, energy prices are increasing, and all suppliers are battling hard against rising costs.

These are just three examples of developments over which you have no influence, but which you need to consider when making business plans for the coming years.

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Pricing and cash flow

Business may be good at present, however, many entrepreneurs at home and abroad have still not come up with a plan B when the market softens.

You must pass on price increases. If you do not pass on price increases to your customer, for one month, you will lose about 35% of your profit.

If you cannot pass the price increases to your client because you have not changed your sales prices, you will lose 75% of your profit.

Driving three or four times to a customer, to be able to deliver a complete kitchen, could cost you your entire profit margin.

Also consider your cash flow. Prepayments to your supplier for appliances, often a long time before they are delivered, puts your cashflow under extreme pressure.

You may still have cash flow, but what happens if less or even no customers visit your showroom? How can you be sure your prices aren’t too high in comparison with your competition?

Or that because you have paid the supplier so far in advance you risk the liquidity of your business and can no longer trade?

Taking steps

We advise our entrepreneurs to take the following 10 steps over the forthcoming weeks and months to enable their business to remain successful:

1. Are you working with the right suppliers? Suppliers with whom you can confidently face the future? Are these suppliers the suppliers who can deliver for you, in every sense?
2. Is your company visible and findable on the many possible search engines. Are you on instagram, facebook, pinterest etc?
3. How are your online reviews?
4. Do you have any cash reserves to weather the coming storm?
5. Have you read your energy supply contract carefully or are you accepting the price increases without knowing what is in your contract?
6. Do you have your fixed costs under control or can this still be improved?
7. Is your store clean and tidy every day? From inside and outside?
8. Are your kitchen displays up to date?
9. Have you made a business plan based on your future costs and expected turnover for the next 12 months, to arrive at the necessary margin you need to achieve to stay viable?
10. Is your CAD/pricing package putting a margin onto your cost prices, or are you still selling at book points?  If you are still selling at book points, you are meeting all price increases from your profits!

Ask the experts

Why not talk to industry experts, as everyone has their own expertise? Don’t be too proud, none of us knows everything.

Did you know that successful entrepreneurs always have advisors (internal or external) operating in specialist areas?

We guide more than 3400 kitchen entrepreneurs in Europe and the United Kingdom and I like to see retailers in our industry being successful!

Think about or seek advice on the following:

1. Condition comparisons (Do you have the right conditions or can I still improve. (A single 1% improvement in your purchase price is an immediate 8.52% increase in your profit margin)
2. Cash flow (30 days payments with payment discount ensures your cash stays in your bank longer)
3. How can I increase my online performance?

My question to you…..do you have a plan B and are you ready for the future?

MHK will be holding its first annual conference, open to all KBB retailers, on November 11 at the British Motor Museum in Warwick .