Commercial Integrator October 2022 - 23

COVER STORY
Eyes on Margins
Our panelists also agreed that integrators
today must be mindful of margins from the
earliest project-ideation stages. Hennings,
for instance, urged webinar attendees
to set minimum-margin thresholds from
a quoting standpoint. " That protection
is very key, " he opined. Integrators have
always had to be margin conscious, but it
has become existential in the last couple of
years because of price instability. " We've
seen probably a 400% increase in price
books, " Hennings stated. " We're getting
them monthly...weekly...whereas, in the
past, you might get a price book once a
year. " The challenge, therefore, is both
simple and enormous: Quoting at a margin
does not mean it's possible to execute at
that margin six, nine or 12 months down
the line. The cost of materials and labor is
a moving target, and integrators must be
proactive in ensuring they have enough
room to execute on a project profitably,
regardless of the timeline involved.
Habben's viewpoint is that we're living in
unprecedented times. " There are so many
things to consider, and margin is incredibly
important, " he remarked. Accordingly,
Electronic Contracting Company is raising
minimum margins due to the various factors
contributing to uncertainty (e.g., labor
rates, inflation, surcharges, freight costs).
But he added that it's not just about setting
proper margins but also about understanding
your costs so you can maintain those
margins. As Habben explained it, " I'd recommend
something as simple as reviewing
the income statement and making sure that
you're job costing what needs to be job
costed. People aren't necessarily putting
everything above the line that needs to be
above the line so that you're understanding
true cost. " NSCA offers integrators business
resources that are useful in ascertaining a
project's true cost.
Labor Utilization and Efficiency
When integrators think about a project's
cost, it's essential to consider not only
labor utilization but also efficiency. This
entails situations like, as Wilson described,
" When everybody's standing around,
waiting for something to happen, or
there are multiple trips to the project. "
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These days, it's harder than ever to keep
labor-utilization rates at 75% or 80% plus
because supply-chain snarls have brought
some projects to a standstill. According
to Habben, with many integrators having
backlogs well into the millions, they find
themselves both overstaffed and understaffed.
There might not be enough
work to keep everyone busy right now,
he acknowledged. However, he added,
" We need those resources so that, when
we do get parts, we can burn through that
backlog. " Given integrators' historical
challenges with cashflow, business owners
face difficult decisions.
All panelists agreed that it's an excellent
time to invest in getting team members
trained and certified, inclusive of both
association and vendor offerings. " In the last
12 months, we've probably invested more
in training than we have in the last five years
combined, " Habben enthused. Indeed, he
reported more than 30 team members earning
CTS certification, as well as attaining
numerous vendor certifications. " What we
can do is be more prepared to be successful,
and to put those people in a position to
be successful when they get back, busy, and
start running work, " he added.
Sharpening the focus, Wilson suggested
integrators direct their training efforts to
specific tasks that pertain to upcoming
projects; doing so, he said, will increase
efficiency on the tail end of those jobs. Hennings
echoed that point, rhetorically asking,
" What big jobs are upcoming? Maybe
you need to train on specifics related to that
job. So, when you hit the ground running,
that team is ready to go. "
Taking a wider view, the panelists encouraged
attendees to be more intentional in
running efficient, financially sound businesses.
" As a job is going on, " Hennings began,
" what's the Estimate to Complete? What's
left to do on the job? Bump that up against
your actuals of what you've already spent
and see how the job is performing. " Zeroing
in on the topic of labor, he urged integrators
to be aware of standard times to complete
project tasks. " Are we performing? " Hennings
asked rhetorically. " Or are we overing
those jobs, where two folks are going to
every task that should only take one? "
As part of an effort to drive efficiency
at his company, Habben recently created
a general foreman role to liaise between
project managers and leads in the field.
That role, he said, centers on what's being
done each day and the quality of the work
performed. " You need to be looking at utilization
and chargeability versus overages
and trying to keep an eye on where you're
at, " Habben advised.
Turning to Subcontracted Labor
At a time of increasing labor costs and
uncertain project timelines, subcontracted
labor has become a more attractive option
for many integrators. It's a prerequisite, of
course, for firms to properly vet their subcontractors
- namely, to perform background
checks, ensure they adhere to proper installation
standards and have them sign solid
agreements. As Wilson stressed, " We have
'When the supply chain repairs
itself, resizing - or getting
those employees back - is
going to be very difficult,
and they're going to be
much more expensive
down the road.'
- Kyle Habben,
president of Electronic
Contracting Company
OCTOBER 2022 Commercial Integrator 23
http://www.commercialintegrator.com
Commercial Integrator October 2022

Table of Contents for the Digital Edition of Commercial Integrator October 2022
