We have been telling anyone who will listen that the luxury segment of the CI market is a lucrative business. CI owners enjoy a business model that features up-front customer cash, 60% top-line margins and, with a disciplined cost structure, the opportunity to bring the owner a million dollars a year in earnings without being an 8-digit custom house.
In fact, a $5M CI business serving 100 to 150 clients a year could achieve that $1M owner’s make, and maintain it for many years.
Here’s what it takes…
Being able to write $5M to $6M in business, year after year. This can be satisfied with two talented salespeople.
Knowing how to bid projects to generate a 60% margin against material costs.
Keeping total payroll to 30% (or less) of annual revenues.
Keeping all other operating expenses to less than 16% of revenues.
Achieving high levels of tech productivity: $10,000 per month (or more) in monthly labor revenues per tech.
Collecting 90+% of customer payments in advance of doing the work – and then keeping track of customer deposits vs cash and inventory, to ensure customer monies are used to fund current projects, or your bank balance. This is how high-earnings companies afford to pay their income taxes.
You can’t get to $5M in your market? Cut it in half; still a good gig.
Of course, just knowing this doesn’t make it easy to accomplish. But we’ve seen it done, over and over. So what makes this such an elusive outcome? Why do so many CI’s end up with much less efficient and rewarding businesses?
Our observation is that companies often lose themselves in the details, the minutiae of the day-to-day. They are constantly rearranging the deck chairs, but without checking for holes in the hull or adequate fuel, without having a clear destination. In the process, their management system loses sight of the high-level realities.
Those six points above are the high-level goals, a clear destination with key markers to guide your path. Not hitting the marks has nothing to do with software, or the latest proposal tool, or in-field technology for the techs or trucks, or which products you do or don’t sell. And they have nothing to do with the still-elusive theory of service-based RMR.
Stick to these 6 tenets and you will reduce chaos, improve morale, create more opportunities for everyone; creating the most value for your enterprise.
Examine what takes you away from these core concerns. Remove the issues and move forward. It’s clear sailing ahead.