January 04, 2013 By Daniel L. Newman
Every year brings new opportunities as well as new challenges. That is especially true given the nature of the integration business, which is dependent on construction and cap-ex investment to continue to grow our top lines.
While growing that prestigious top line number is sexy and certainly important for those trying to improve their top-50 statuses, it pales in comparison to that bottom line number that funds payroll, investment and continued operations. Unfortunately, for a number of reasons there are no lists of top-50 bottom line performers.
Improving the bottom line requires healthy sales blended with well-run finances and operations. While this may sound simple enough, it isn’t always so easy. The little things can make the difference between profits and problems. So this year, let’s focus on the little things to make sure the profits that drive our businesses are big.
Here are five everyday items we should all work to do a little bit better in 2013.
Many CIs allow their sales personnel to handle quoting. This in itself is OK, but many sales personnel tend to use straight margins across all product subsets. Make sure items such as accessories, racks and audio equipment – items that customers tend to shop less aggressively – are given appropriate margins to offset the erosion that is taking place with products such as projectors and video-conferencing gear.
As an extension of margin management, it is important to treat purchasing as a key to your profitability. Many of the larger integrators have figured this out, but it has remained a problem for smaller CIs. This is due in part to the investment that has to be put into purchasing management. If careful purchasing management can yield 1, 2 or even as much as 5 percent improvement to cost of goods, it can become a profit center, and those percentages are very attainable.
Accounting for All Costs
While CIs generally have a good understanding of hard project costs like labor, far too many integrators don’t consider the soft costs of running a business. Known as a G&A (general & administrative) cost, many integrators don’t charge for this (whether buried or as a line item). This is because many integrators have difficulty explaining it or just completely overlook it. But costs like these add up and can be worth as much as 10 percent of a project’s worth.
Let’s make 2013 the year to find ways to incorporate service into every project. Think about how much more profitable your business can be if just 10 percent of your total revenue is backfilled by high margin services.
This one is a “big” item that is wrapped up in little ones. I call it “Management Osmosis” where managers think that through some form of telepathy or osmosis, employees know what their management wants from them. This year, make sure to use the many available forms of communication to let your employees know exactly what it is you want for them to know. It amazes me how often employees don’t feel they clearly understand a company’s vision, mission or even their marching orders. If you improve this, everything else will follow.
The little things may not be exciting for executives, but they are key components to a business’s success and profitability. Pay attention to them and reap the benefits of a better bottom line. Perhaps more importantly, doing the small things well will allow you to seize the opportunity to focus on planning for what is next.