New Year’s Resolution: “No Contribution, No Sale”

Integratocwnsca-netincome-0112rs, I’m going to say this one last time; you cannot be successful if you are trying to operate a box sales business within your integration company by using the same overhead structure. I’ve never seen it work where a low-cost provider is also operating as a value-added services company. The overhead structure is dramatically different from those who sell via the internet.

I spoke with a member just yesterday who said they have run a successful box sales division in their business for years and now are thinking it’s time to shut it down. My question was; how do you know it was successful? What made you believe it was? Sure enough the answer was “while it didn’t make us money, we got our volume up where we wanted it.” OK — then what about cash flow, inventory write-downs, warehouse costs, returns, warranty repairs? The logic just doesn’t work.

And it’s not just box sales. We have to look carefully this year at what really makes us money. I would go as far as to break it down by market, geographic, system type, product line, even by customer in order to know what is working and what’s not.

Profit is the primary goal. Growth comes after that. Maintaining employment levels follows both. Companies are finally starting to get the message that profitability is the key and that revenue numbers and employment levels follow that in order of importance.

Walking away from any sales opportunity is very tough. Nobody wants to pass it up, but if the sale brings no positive contribution to the bottom line, then we need to pass. I’ve spoken to many companies who actually help their customers (who are looking for best pricing) buy endpoint devices readily found on the Internet. They have no exposure, no liability, no warranty concerns, but earn the installation and maintenance work. It’s a very hard decision to make, but again — no contribution, no sale.

Many integrators are stuck feeling like they are just “trading dollars” right now, awaiting a break in the economic slump. Some are really struggling with weak backlog and wondering whether to diversify or stay focused on what they do best. Some are stuck as the undisputed technology leader in a marketplace or vertical market that is very soft.

I know it’s hard, but when you are faced with a declining sales outlook, you’ve got to make changes to the operation and business plan. Don’t hesitate to reach out to me if you find yourself in that situation. Likewise, if you have a great success story on a winning strategy to share with others, please share.

Chuck Wilson is the executive director of the National Systems Contractors Association (NSCA), a not-for-profit association representing the commercial electronic systems industry. At the helm of NSCA, much of Wilson’s time is spent assisting contractors with the challenges of today’s business environment. He often gives lectures and presentations at key industry events, and has been published in numerous leading trade journals. Reach him at cwilson@nsca.org