Let’s Talk About Multipliers

We are here today to talk about calculating multipliers for different cabinet manufacturers.

I want to clear up questions I get concerning multipliers. I blame the confusion on large national cabinet manufacturers, building material suppliers, dealer perception of special deals, and questions about how multipliers relate to the list price.

Company ABC

List Price: $35,000

Multiplier: .25

Net Price: $8,750

Company XYZ

List Price: $20,833.33

Multiplier: .42

Net Price: $8,750

In these examples, we have two sample orders from domestic cabinet manufacturers with identical net prices. They both essentially offer the same quality, range of products, and customer service. Is this likely? No….

However, this isn’t a conversation about vendor selection, but rather an explanation about multipliers.

All things being equal, if you are a kitchen dealer considering Company XYZ, they can’t reduce their multiplier to .25. That would be a 40.5% reduction! Well, they could, but then they would need to simultaneously increase their list prices.

I was recently asked by a dealer for a lower multiplier. I get asked this throughout the year because I sell a company with a higher multiplier. Possibly I was a little off my game, because I told him what I tell everyone: “We offer one multiplier.”

And to get a better multiplier — which is extremely rare, by the way — you’ll need to prove yourself.

“But you are so much more expensive!” he insisted.

At this point, I understood what I was being asked. I said: “Compared to what?”

Dealer: “Well, the company with a lower multiplier.”

I explained that while the multiplier is important, of equal importance is the list price.

I said: “I bet they have a higher list price” to which he replied, “Well yes. “How did you know?”

“Because I know the two companies are very similar and what you need to concern yourself with is what is the net cost of the cabinets — your cost — and not what the multipliers and list prices are.”

Having said what I did previously about multipliers, here is some more information.

Some import companies selling R-T-A and assembled cabinets offer assembled cabinets at one price and R-T-A cabinets at 8-10% less.

Some domestic manufacturers with large regional dealers offer programs where they have higher multipliers for remodelers or contractor programs. They bill the remodeler directly at a higher multiplier than the dealer pays, with the dealer getting the difference. The remodeler thinks they are a direct customer, when in essence they are buying through the large regional dealer.

Some large manufacturers offer a multiplier up to 20% lower for high volume dealers vs. their kitchen-at-a-time (KAT) dealers – think millions of dollars per year in purchases vs. say $100,000 in annual purchases for the KAT dealer. These companies are just so big they can “buy” volume if they have to. If you think about it, their smaller dealers are underwriting the bigger dealers’ discounts.

Even small cabinet manufacturers will offer better multipliers if there is some efficiency they achieve through your purchase volume, but these are more like 5% than 20% deductions.

But just to be clear, volume discounts are a different conversation than a K-A-T dealer comparing two companies’ list prices and multipliers. Especially if other vendor selection criteria, besides cost, is similar.