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Business Intelligence for Custom Integrators

Tuesday Morning Coffee

Tuesday Morning Coffee

Vital Question #68

Posted on June 18, 2015 at 3:10 PM Comments comments (9)

Is There A Hidden Path To More Sales? And ... How Do I Find It?

The flow of business for most owners is communicated by their P&L: how much revenue has been realized in what timeframe. In the best-run companies, this equates to the value of actual production over that timeframe, ie, the value of goods delivered and services provided.


But there is additional insight to be gained by charting the “sales written” features of past contracts.


Companies following our Quick Books process can easily run a report that shows how many new JOB contracts were generated each month of the past 24. This information alone reveals the relationships between when jobs are contracted, vs when production happens – a booking curve vs a billing curve, as it were.


Now, connect each new job with the salesperson responsible, and the source of the lead (eg, client referral, design/builder relationship or net new client). Going further, if you have a date of the final invoice on these contracts, you now have a really valuable data set. Here are a few of the metrics you can calculate…

  • Average contract size by month
  • Average contract size by salesperson
  • Average contract size by referral source
  • Average length of project vs contract size

This simple exercise will reveal the footprint of your sales model, and help you determine a viable path to more sales. Especially productive (or non-productive) salespeople could be clearly identified – not just how much they write, but also what kind of jobs they write.


You might find trends, transactions, or referral sources that influence your activities going forward. You might find dependencies that require action sooner (e.g. too much reliance on one builder or one source of business). Your ability to increase future sales levels is often hidden in the look backwards.


Knowing more about the sales flow into your business can’t hurt and just might help you manage up to that next level.


If you’d like to know how to get the simple monthly “sales written” report out of Quickbooks, e-mail your request to [email protected]

 

And please share your findings with us. We are happy to help you think about what it means.

VITAL Question # 64

Posted on June 3, 2015 at 12:55 AM Comments comments (2)

What Kind of Advertising Does Your Brand Need?

[very little, in our opinion]

You don’t need to be wealthy to recognize the names of luxury brands like Rolex, Coach, and Ferrari. As a company, though, you would need to spend an extraordinary amount of money to make your brand so widely known.

 

Fortunately, CI’s don’t need their brand widely known. They need it known primarily to people who buy/live in expensive homes, along with people who know the people who buy/live in expensive homes.

 

These are the “1%’ers”, typically millionaires and, for most integration companies, the very customers with whom they already do business. The trick is to expand the network of millionaires who know and recognize your local brand as something special. You can do this by managing your brand, and managing your relationships.

 

Your brand stands for something. You need to know what that something is (it’s not low prices). Your brand is a promise you need to be able to communicate, and that your entire staff must support through its daily actions. And, once a client commits to your brand, you must continue to remind them of that promise. Frequently, and forever.

 

Now, you don’t do this with daily e-mails promising a special price or product. That might work for wine and other “transactional” goods (trust me, it works for wine). But for expensive, complex systems offering benefits of which many clients are not even aware – let alone of in need – the communications must be informative, valuable and even enlightening, without sounding as if you’re trying to sell… anything.

 

When your regular communications (at least once per month) engage clients with topics they find interesting, they will not only better remember you, but their trust and respect for your brand will actually grow. They will move from being satisfied, to becoming loyal, to becoming an advocate. Once an advocate, they will regularly remember your brand to their millionaire friends and colleagues, including ones who don’t live in your area.

 

Relationships thrive on regular communication. The customers a company already has are its most important relationships. Properly nurtured, these relationships can grow an integrator’s brand faster, and for less cost, than any affordable amount of “advertising” ever could.

 

Imagine if this relationship-building approach could be scaled for a single brand shared by integration companies across the US. In short order, it could well become the most powerful CI brand in the industry. We’ll talk about the power of scale next week.

Talk About A Luxury Brand . . .

40 mil watch 4

Ever heard of Graff? They recently unveiled a $40 million watch. Read about it here…

http://www.forbes.com/sites/robertanaas/2015/03/18/graff-diamonds-unveils-150carat-diamond-convertible-watch/

 

VITAL Questions # 63

Posted on June 3, 2015 at 12:55 AM Comments comments (3)

Can Yours Be A Luxury Brand?

[Hint: It Should Be]

 

All CI companies live on their ability to grow sales via the network of people with whom they already have a relationship. This includes their past clients, friends and family, and any builders/architects/designers and other strategic partners in their “circle of awareness”. Rare is the CI whose name is well-known beyond the clients and partners with whom they have dealt with in the past.

 

This is why a CI’s customer list is the most important marketing asset they have. Many, if not most of the clients on this list, rank among the “top 1%” of income earners in the US ($380K+ annual income). This helps them afford numerous luxuries beyond their 5-digit $ home theater. They travel, belong to country clubs, frequent fine restaurants, wear high-priced watches and exotic shoes, and drive the best cars. Their expectations are different than those of Middle America. They seek and support brands with a luxury cachet.

 

CI’s should aspire to be one of those brands. Website and communications should be shaped for the desires and tastes of the wealthy. Regardless of whether the business owner(s) enjoy their own “top 1%” lifestyle, the company should be seeking to develop a reputation that its wealthy clients can enthusiastically share with their wealthy friends.

 

This cannot be achieved quickly, or broadly. It requires relevant and regular messaging to the people who will be most receptive to your brand’s story, and most likely to act on it.

 

Most established CI’s have a list of 500-2000 millionaires with whom they’ve already established a degree of trust. Next time, we’ll talk about how you can reach them, and nurture them, with the story of your brand.

 


Vital Question # 62

Posted on June 3, 2015 at 12:50 AM Comments comments (2)

 

What If the Industry Had Standards?

Some years ago, one of the presenting dealers at the CE Pro Top 100 Summit asked to talk with me. We sat down following his presentation and he confided, “It’s embarrassing to be up there talking like I’m some kind of whiz business manager. My business is a mess.” When I looked at his financials, I learned just what a mess it was.

 

His company was invited to the summit because of its sales volume. While you might think annual revenues is a “standard” way for quantifying sales volume, the fact is there is no standard for how Custom Integrators recognize revenue. Some recognize customer payments as revenue. Others book a sale when they ask for customer payments. Still others defer all revenue until a project is finally complete.

 

Nor are their standards for how companies measure gross profits and margins. And, as my recent blog at CEPro.com explains, we can’t even agree on what is, and is not, included in labor cost.

 

These widely-diverse ways of “counting the money” mean no two companies in our industry can be readily compared. The only meaningful benchmark is net operating profits – 10% of sales is good, 20% is really good – but even this metric varies based on the multiple ways companies record owner’s income.

 

If the industry had accepted standards, companies could better ascertain how their performance stacked up. Companies could quantify the improvement needed to become a top performer in a specific area. They could seek out companies who were top performers, and look to their methods as a model for their own. The CE Pro Top 100 could become a far more meaningful gathering, recognizing companies for not just revenue production, but also Gross Margins, labor efficiency, compensation management, and customer deposit coverage.

 

VITAL Management has developed a very standardized financial management system, and regularly compares results between companies.

 

This helps each company to work on specific areas promising the most gain. It all starts with a standard Chart of Accounts. If you’d like to see ours, click here.

Link to CE Pro blog…

http://www.cepro.com/article/how_ci_companies_can_be_more_the_same/

link to download accounts from dropbox…

https://www.dropbox.com/s/cuxisegz6gufi63/TLM%20account%20structure%20overview.pdf?dl=0

VITAL Question #67

Posted on June 2, 2015 at 1:05 PM Comments comments (1)

In CI, How much should a sales person write?

And… What should s/he do besides sell?

 

Used to be that a salesperson writing $500K/year was pretty good, and a $1M salesperson was exceptional. But as the CI channel has grown, so have the numbers. In fact, recent data from the Bravas Group suggests that salespeople who write only $500K may carry prohibitive costs for their employers.

 

Consider what a company can pay a $500K producer. At 8% of sales – a percentage that’s fair to the employee and the company – the salesperson would earn $40,000. At 10% of sales, which is too high for many companies, it would be $50,000. We regularly see such performers earning more.

 

Another cost is that $500K salespeople tend to sell smaller projects than $1M and $2M salespeople. This isn’t necessarily because the company caters to mostly small projects – it’s an accurate observation among companies with multiple salespeople. The less confident, less skilled salespeople aren’t comfortable presenting big price tags. Instead of closing the customer at $40,000, the deal gets closed at $30K, or even $20K. That’s a huge cost to the company, and maybe to the client, too.

 

There are related issues. Low-end producers churn thru a higher number of potential clients, which requires more proposals and meetings. It’s really inefficient; with a typically lower close rate than the more successful salespeople. Deals that should have come to the company go somewhere else.

 

Different duties

When compared with salespeople writing $2M or more, the sub-$1M producers show significant differences in their involvement with business development, proposal generation, and actual production. The $2M+ salespeople are intrinsic to the business development process but far less involved with generating proposals. Once the deal is closed and actual production has commenced, these star performers go back to generating new business, leaving the project in the hands of the production staff.

 

These observations will impact the way our companies staff and organize their sales departments. The Bravas Group will be defining the best ways to do that, with a focus on how to find, develop, and foster high-producing sales talent.

 

You should join us.

VITAL Question #66

Posted on June 2, 2015 at 1:00 PM Comments comments (3)

How Does a National Network of CI Dealers become Real? And ... How Your Company Could Benefit.

To succeed as a national entity, a collaborative network of integration companies will need to address three requirements:

1) Consumer appeal & awareness

2) Operational excellence

3) Employee & owner benefits

 

Consumer Appeal

Last week we introduced you to bravas, the new brand that will be used by select Custom Integrators across the US. More than just a name, bravas is a united effort to create a consistent and exceptional customer experience across the bravas partner network. Our goal is to have a common sales and service process so that the bravas promise can be fulfilled every time, for every customer, at each bravas location. A single website, a shared customer list of some 30,000 millionaire homeowners, and a consistent customer experience will give bravas the cachet and awareness to become a recognized luxury brand for CI.

 

Operational Excellence

Because of standardized financial metrics used by all bravas partners, we know which companies have the best margins; which companies deliver the most optimized mix of entertainment, environment, and infrastructure systems; which companies have the most efficient labor productivity. Our best performers are able to share what they have learned, to the benefit of others across the group. This “best-practice” sharing is helping each bravas partner advance their procedures and processes, while developing organizations with a superior architecture for customer care, growth, and efficiency.

 

Employee & Owner Benefits

A business that’s growing gives employees more opportunities than a business that’s not. Add to this an organizational architecture that defines those opportunities and income and, for the first time, CI employees will discern something of a career path within our united organizations. It will become easier to hire, train, and retain quality employees.

 

The Bravas Group Cooperative – the cost-sharing legal entity owned by the bravas partners – will provide member companies with services they could not afford on their own. This will lead to greater enterprise value without giving up any control. Each Bravas Group member remains independent and locally-owned; profit remains in your company.

 

For You?

Working on their own, without a model to learn from, every CI has evolved into its own version of what a CI should be. Some have become strong. Most remain as owner-operator firms with few options to become a company with lasting significance.

 

As a collaborative association of like-minded owners, Bravas Group presents a unique option for strong CI’s to further improve, grow, and prosper from their business. It is an opportunity to be part of an organization aimed at becoming the most significant brand for the delivery of CI goods and services in the US.

 

There is strength in numbers. If you qualify, you’re invited to become a part of the Bravas Group Cooperative.

VITAL Question # 65

Posted on June 2, 2015 at 1:00 PM Comments comments (2)

What If Your Brand Was In Multiple Markets?

It’s no mystery that integrators have had little success expanding out of their local markets. CI is a business where existing relationships drive over 90% of annual revenues. Typically, there are no (or few) established relationships in non-local markets. And there is no easy way to quickly and affordably create those relationships.

 

A more successful approach has been to acquire or merge with another company in a remote market. Established relationships come with the deal.

 

In this scenario, a common brand and website could be created for the two entities. A single website would consolidate traffic and rankings, while better impressing potential clients that this is a business with tangible scale and success.

 

Referrals and repeat customers would still account for the huge majority of new revenues in each market, but at least a customer in one market could refer a customer in the other market. This is a missing piece in the growth of the CI business nationally.

 

If you are my wealthy friend in Oakland, and I’m in St Louis telling you about the really cool system I had installed here, my referral is pretty useless. You’re left with the same options you had before I told you about my St Louis guy – get a local referral from somebody in Oakland, or search the Internet and make phone calls to Oakland-based CI’s.

 

It doesn’t matter that some integrators are willing to travel, because that doesn’t scale as a national model. What does scale is a single brand and website used by integrators across the US.

 

A group of like-minded CI owners are building one. The brand is bravas. The website will be bravas.com. And if your company were to become a bravas partner, you’d soon begin to enjoy the advantages of multiple companies presenting their communications and brand message as one.

 

Our regular communications will drive website traffic from each of the bravas partners’ local markets. The traffic from 20 or 30 or 40 markets will make bravas.com the most-frequented CI website in the US. The bravas partner in St Louis still won’t be a viable option for my wealthy friend in Oakland, but the Oakland bravas partner will be. And because bravas is a true brand, all bravas partners will offer the same level of customer care and support.

 

For the first time in the history of CI, an affluent St Louis homeowner will be able to make a referral to his wealthy friends in Oakland, Dallas, Philadelphia, Atlanta – wherever there is a bravas partner. For the first time, customers won’t need to know somebody, locally, who knows a local integrator. They’ll need only know… bravas.

* * * * *

This is a game-changer. It will give Bravas the mass to thrive, even as the big non-CI players commoditize smart home products and services. It will bring each bravas partner wealthy customers they would otherwise have never seen.

VITAL Question # 59

Posted on April 2, 2015 at 4:00 PM Comments comments (2)

How Can I Better Manage Change in My Business?

Everyone gets comfortable with the status quo. After all, the easiest way to do things… is the way you already do things.

Change is hard. People resist change because it requires learning to do things differently. But without a change in how things are done, outcomes are unlikely to improve (see Albert Einstein, Insanity).

At VITAL we are helping companies change in two fundamental areas: financial management and production management. Despite the fact that both have huge potential paybacks, it’s not easy for the organization to stay focused on the required initiatives. One of our key roles is to be the coach/accountability partner for the manager making the changes. We help get things done!

Here are three surefire hints for successfully managing change with the team.

1. Make sure the team – and particularly opinion leaders in the Group – buy into Why it is necessary to change.

2. Collaborate on how the change should be introduced. In many cases a phased approach is OK. Others like to tear the Band-Aid off quickly.

3. Review regularly, celebrate progress, and have improvement metrics visible to the Group.

To get a good read on how a company’s financial and production management compare with like companies (we call this benchmarking), it’s necessary to have a standard “counting” system that all companies use. Most companies are not set up to do this – “getting on the system” is one of the most fundamental changes they need to make. With the system in place, the ability to see and manage the business is magnified far beyond what companies can do on their own.

In the labor-based CI business model, having the most efficient production process is typically the difference between OK and great performance. Again, this is not an area where most companies have easily-compared standards. Our collaborative group model has helped us identify over 14 improvement strategies for maximizing labor productivity.

Change is hard, yes. But it doesn’t have to be disruptive. Come see how companies are adopting change and seeing immediate results. There is strength in numbers.

 

VITAL Question # 58

Posted on March 30, 2015 at 8:20 PM Comments comments (4)

What Does It Cost To Do The Same Thing?

 

 

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” –Albert Einstein

 

Compounding Performance

 

 

Compounding (definition) refers to generating earnings from previous earnings.

 

 

Recently a discussion with a friend over a sarsaparilla turned to what is the cost of the status quo in business? Meaning, what if we just keep doing what we’re doing.

 

So we went down a different path. What if, we could grow 15% each year for three years? And, what if, we could improve profit 3% then 2% more and then 2% more in those years?

 

Napkin time for sure.

 

We started with a $3.5M dollar business making 8% net. The numbers work relatively regardless of the start. The volume growth brought us a $3.477M accumulative sales increase (almost equal to our current run rate). The profit improvement because it is first dollar based, got to an amazing $823K in the 3 years.

 

So instead of being a $5.3M enterprise making 15% net, we would remain a $3.5M business making 8% assuming the wheels didn’t come off in the meanwhile.

 

In this example, it would cost us $270K a year equivalent by just doing what we are doing.

 

Our free in depth business analysis can show you where your hidden costs are. And if you agree we can coach you to better profits and better results. It’s VITAL to your business.

 

Use the Power of Compounded Performance to your advantage.

VITAL Question # 57

Posted on March 30, 2015 at 8:00 PM Comments comments (0)

SMALL BALL or MONEYBALL?

The movie Moneyball, based on the book by Michael Lewis, dramatized the beginning of the “metrics” era in baseball. The story showed Oakland A’s GM Billy Beane taking a decidedly non-traditional approach to evaluating players, assembling a team based on numbers rather than the gut feel of scouts and coaches. The results made for a really fun story. Baseball front offices haven’t been the same since.

 

You can do the same for your business. Instead of making decisions based on gut and feel (and the current balance in your checking account), you could implement a more metrics-driven approach that would help you better see the potential risk, and reward, of any opportunity you confront.

 

In the context of growing your business, this is an essential approach.

 

The Most Important Numbers

In our view, it is imperative that companies maintain their market share by keeping pace with the growth of the market. But this is not a purely top-line play. Growing sales is important. But growing profits is really important.

 

For this reason, we consider Gross Profit to be the most important number for your company to grow. GP reflects revenues and margins. After paying for the goods you sell, it’s the money you have left for bills and profit.

 

In 2014, the companies following our system grew sales a respectable 13.6%. But their GP increased by over 20%, while compensation grew by only 11.4%. That left some $2.5M of “unallocated” incremental Gross Profit, $2.1M of which went directly to the bottom line. The overall gain in net profits was over 90%.

 

This is consistent with the historical profit gains from our system, which have typically averaged over $100,000/year per company.

 

You can learn more about the metrics we use at www.vitalmgt.com/metrics.

 

And if you e-mail or call us, we can tell you about a significant MONEYBALL opportunity for $2M+ integration companies.

 

May you Profit, Grow, & Prosper!