Are You drinking The Kool Aid?
In this issue ....
20 great benchmarks
517 words, a 3 minute read.
We have now shared over 350 coffee snippets and have given out more advice than any other resource feeding the CEDIA faithful.
Our themes are consistent and sometimes redundant, but the intent has always been with one goal in mind: to help make CI companies operate better and enjoy better rewards for improving their businesses.
Our hypotheses have become solid operating tenets of the business. Beginning at the sale activity levels and working their way all the way through the balance sheet. There is no business school for custom integrators. The path is often made up as you go. It confounds us why companies don’t adopt a system, why there is so much local invention of ways of doing things. Maybe it’s a touch of entrepreneurism that insists on self-discovery.
So how does one get from sales to revenue conversion (forecasting), pricing, compensation/pay, expense management, EBITDA to asset management? And how does a company validate its performance along the way?
Simplified feedback is a good place to start. We have 20 measures to help you drive better results. So, when is my companies firing on all 8 cylinders? Here are our end-to-end benchmarks:
1) Proposals generated net month totals need to be 2x the average trailing 12-month revenue 2) Sales written need to be 1.2x the average trailing 12-month revenue 3) 30-day deliveries (under contract) need to be 25-days of the trailing 12-month daily revenue average 4) 90-day deliveries (under contract) need to be 70-days of the trailing 12-month daily revenue average 5) Labor Mix: Labor revenue/total revenue needs to be >33% 6) Parts Mix: Misc. parts/total revenue needs to be >7% 7) Top Line Margin (without labor costs: materials only) needs to be >60% 8) Labor Margins (labor revenue with labor direct costs) needs to be >50% 9) Net GM needs to be >47% of revenue 10) Technicians pay needs to be < 15% of revenue 11) Sales pay needs to be < 7% of revenue 12) Support pay needs to be <10% of revenue 13) Total payroll needs to be < 35% of revenue and 30% less than Top GM (vii.) 14) Occupancy costs must be <6% of revenue 15) Other expenses must be <10% of revenue 16) Net Income should be >19% of Revenue 17) Net Income should be above your monthly plan (track it monthly) 18) Accounts receivable sales days should be under <30 days 19) Inventory Days should be under <35 days 20) Total AR & Inventory should be < 11% of trailing annual revenue.
As we have always preached, it is more about the actions you take than the information you track. But better information can help you drive action. There are enough companies on this track to provide excellent benchmarks and comparative data, so you don’t feel like you are going it alone.
Drinking the Kool Aid is about prioritizing the business management system in a way that it becomes culturally ingrained. Here’s to owner/operators thirsty for the better results and having more sanity in their business. Cheers!