Fast-Forward Business Coaching & CFO Services (314) 328-1250
 
HOME - Profit | Grow | ProsperPROFIT on Purpose: The Top-Line Management SystemGROW. The 4 P's of Business GrowthTLM Project Mgmt ReportsWEBINAR: The TLM Project Management ProcessTLM Project Management Process GuideQUICKBOOKS FOR INTEGRATORS Training Course
 
How Companies Are Doing in 2013 - 4th Annual Integrator Productivity Report

 

4th Annual Integrator Productivity Report reveals...

Companies using the TLM System

continue to Grow & Profit.

Complete table of summary metrics shown below.

Fast-Forward's 4th-annual Integrator Productivity Report reviews integration companies thru the first half of 2013. On average, sales are up over 20%. For the larger companies in the survey, ytd employee productivity annualizes to over $193,000 revenues-per-employee (RPE). And net operating profits for these companies remain healthy at over of 9% of sales. But GPP is only 1.65 - and that could make it challenging to achieve double-digit net profits for the year. More info below... 

What is Gross Profit Productivity and why is it

the #1 metric around which you should manage your company?

Click here to download our free whitepaper about GPP.

For the 2013 report (see below), we compare two separate groups of companies…

The “1-on-1 Companies”, shown in the left-middle column, are companies who engage Fast-Forward’s comprehensive CFO services, which include annual financial planning and monthly review, reports, and analysis. These companies are larger than typical CEDIA companies, with annual sales averaging close to $3M/year.

The “Group Companies” are shown in the right-middle column of the report. These companies are involved in Fast-Forward’s Profit Management Program. They are closer in size to the typical CEDIA company, with average sales of just over $1M/year.

The far right column of the report shows the TLM benchmarks for the various categories.

An explanation of the TLM Productivity Analysis and report methodology is provided below the table.

2013H1_report.jpg
2013 Fast-Forward Business Coaching

 

 Key Findings

The averaged results show both groups of Fast-Forward client companies falling into the TLM benchmark range on most metrics (where they do not is shown in red). This is not a coincidence, of course – these companies actively follow the TLM System. Their monthly operating targets and actual performance are regularly reviewed and compared to these benchmarks. Management strategies are continually adjusted to improve any areas of weakness. 

The two groups differ in a couple key categories:

  • Sales Productivity – the larger “1-on-1 Companies” are realizing higher annual revenues per full-time employee (or equivalent). This creates higher GP per employee, and allows higher pay for each employee.
  • Gross Margins – while the Fast-Forward companies are in-range on top-line GM (GM before Direct Labor Costs), the Group Companies fall short of the target 40% GM net of labor. This is due in part to a sub-35% GM on equipment. Just as significant is that labor revenues represent only 30.1% of total revenues for the Group Companies. They need to improve their labor allocations going forward. 
  • Gross Profit Productivity – This is a company's "ROI" on compensation, and a key indicator of potential profitability. Typically, a 1.65 GPP would indicate low single-digit profitability. But because both groups have lower-than-average Major Operating Costs, their net profits remain healthy.
  • Net Profit9.3% for the 1-on1 Companies is respectable, but not as good as it could be. Nonetheless, these companies are on track for an average per-company profit increase of $146,000 in 2013, compared with 2012. 

Click the report image to open a printable pdf of the report summary shown.

     

Methodology

The 2013 Report aggregates Jan-June data for integration firms who have worked with Fast-Forward in 2013. The data is drawn from P&L reports and employee data that Fast-Forward maintains in its role as management coach and CFO. Each of the companies in the survey is versed in the metrics and practices of Fast-Forward’s TLM System, and meets with Fast-Forward on at least a monthly basis to review results, and discuss strategies.

How does your business compare? What can you do to make it better? Order a TLM Productivity Analysis for your company, including a call with Fast-Forward to discuss findings and improvement strategies , for only $297. We call this our Fortune Teller I analysis and prediction packge. Click here to learn more.

The TLM Productivity Analysis – What It Means

This analysis of a company’s key operating metrics is created by reconfiguring a company’s P&L to TLM format. It also requires employee data, including:

  • # of full-time employees and equivalents (FTE’s)
  • # of billable employees – installers, programmers, technicians, etc – and equivalents (BEE’s). Includes subcontractors.
  • Average hourly wage of all BEE’s
  • Average hourly billing rate for all services

The key measures may need some explanation…

Sales Productivity is our term for annual Revenues per Employee (RPE).

Direct Labor Productivity is a measure of annual labor revenues per BEE. Obviously, you must track labor revenues separately from other revenues to calculate this measure. Then, divide by the number of BEE’s.

Labor Utilization Efficiency is billed labor hours as a % of labor payroll hours. This measure is calculated directly from P&L values. For a thorough explanation of how to derive this really valuable measure from your P&L – without looking at a single timesheet – request your free copy of Fast-Forward's "How to Manage Labor Productivity" white paper by e-mailing steve@ffbizcoach.com.

Sales Mix is a key TLM metric. Integrators derive income from three basic categories: Equipment, Install Parts, & Labor (any other income sources – security monitoring, electrical, satellite commissions, reimbursements, etc – are called Other). This has proven to be a tremendously valuable component for measuring and improving Gross Profits. The other component in the TLM Profit Matix is..

Gross Margins. A key number here is GM before Labor Costs (the GPP white paper offered above explains this incredibly valuable measure). I call this Top-Line GP and the target is 55%-60%. The Labor margin is labor revenues minus labor costs.

Compensation Metrics. Direct Labor totals the gross wages paid to billable employees, plus monies paid to subcontractors. Sales Commissions are self-explanatory, but it is worth noting that the TLM benchmark is not the rate recommended for compensating salespeople. Rather, it is what sales commissions typically total inan integrator environment, where few companies have a 100% commissioned sales staff. Payroll Taxes & benefits is an aggregation of all “non-earnings” payroll expenses, including FICA, medicare, and benefits. Another really, really important number. Finally, the GPP ratio is the most powerful indicator of profitability we know. Manage your way to a good number (2 is awesome) and… You will make money!!

Major Operating Costs are not areas that need critical management in most companies, but the total of Admin & Occupancy (monthly fixed costs) plus Sales Expense (a variable monthly cost) needs to be managed to under 16% of sales, in aggregate. Sales Expense is a whole bucket of sales-volume related expenses: fuel, freight, credit card fees, marketing, uniforms, small tools, T&E. Really helpful to measure these as a % of sales.

Most of the integration companies I’ve reviewed – hundreds over the past nine years – knew very few of these measures before we talked. It could be really valuable for you to consider a TLM Productivity Analysis for your company.

 

You can order a TLM Productivity Analysis for your company, including a call with Fast-Forward to discuss the findings, for only $297. To learn more about our "Fortune Teller I" analysis & prediction package, click here