08.11.2008 — In a time when many industries have retreated into negative territory, the custom installation industry is more than just treading water. In many cases, companies are reporting double-digit percentage growth.

On average, companies are experiencing 6.9 percent growth and earning 8 percent profit in the first half of 2008.

In an industry used to double-digit growth (and over 20 percent annually just recently), it's enough to earn the custom industry a "B-" grade for the first half of 2008.

This type of growth in the auto industry or other suffering business would be hailed as "A+," but we are a bit spoiled.

That's the news from veteran business consultant Steve Firszt of Fast-Forward Business Coaching in St. Louis.

Firszt surveyed his clientele to gauge how the first six months of the year have been, and the results were mixed. He uses a system called the Top-Line Management System to assist dealers.

"This report presents the actual operating numbers for Fast-Forward's integrator clients through the first six months of 2008. The sample represents a good cross-section of custom integrators both large and small. It is a reasonable benchmark for comparing your own year-to-date results," says Firszt.

Sales Up 7%, Margins Hit 57%

Sales: The news is good, and not-so-good. Compared with 2007, 40 percent of Firszt's clientele are experiencing double-digit sales growth thus far in 2008.

But another 40 percent are experiencing declines. In aggregate, the group has posted a sales gain of 6.9 percent thru June.

Equipment/Labor Mix: About 70 percent of sales are in equipment and install parts, with 30 percent of revenues realized from labor billings. This is pretty consistent with industry figures recently reported in CE Pro.

Margin: Gross margin is calculated as total revenues including labor, minus cost-of-goods before labor. A 60 percent gross margin would be outstanding. The aggregate GM for the group is 57 percent.

Labor Costs, Compensation Up

Direct Labor: The Top-Line Management system defines this as the gross wages, salaries, and overtime of all employees whose time is billed to clients. It also includes the cost of any outside subcontractors.

A really good number would be 40 percent (i.e., for every dollar of labor revenue, there is 40-cents of wage and/or subcontractor costs); 60 percent is considered acceptable.

With sales targets not being achieved in many cases -- while payroll costs remain largely fixed -- direct labor cost for the group is running at 64.6 percent of labor revenues. (This results in a net margin, after labor, of 38 percent. The target is 40 percent or higher.)