This Stress Tester Can Show You How Virus-Related Sales Declines Will Hurt Your LBM Operation
The only thing involving the coronavirus pandemic that construction supply executives can predict with certainty is that sales will be much weaker this spring and perhaps into the summer. Often, those declines will more than offset the increased business many dealers saw in January through mid-March.
So, if you're running an LBM operation, it's time to ask: What will the impact be if sales this year shrink by 20%? By 33%?
This downloadable LBM Stress Tester spreadsheet can help you forecast and adjust. Based on a spreadsheet created by Jim Enter, consultant and longtime roundtable leader, it's designed to show the impact on operating profit from a decline in annual sales of 20% or 33%. The spreadsheet also makes it possible to do "what if" estimating by adjusting such factors as gross margin, payroll, and various expenses.
The example above shows what would happen to a dealer with $30 million in annual sales and 24% gross margins. Assuming payroll, occupancy expense and administrative costs remain the same, this sheet suggests that a 3% operating profit at the current sales pace would turn into a 1.29% loss if sales fell 20% and a 5.71% operating loss if sales dropped 33%.
Questions? Comments? Contact me at firstname.lastname@example.org.