Cross-Industry Financial Benchmarking from Al Bates
Every year as part of the NAHAD Distributor Profitability Report, prepared by Profit Planning Group (PPG), we provide a cross-industry comparison of results. It is attached in an Excel format.
Unlike the reports prepared on compensation, it is not possible to make direct comparisons across different industries on factors such as gross margin, as some industries are high-margin ones and others are low-margin ones. The only exception to this rule is Return on Assets. Profit is profit.
What can be done is to compare changes in performance. That is, are the key profit drivers in the industry getting better over time or worse? It is an incredibly strategic issue and the attached information should be viewed as an integral part of your financial benchmarking effort.
There are several issues that appear to be driving performance in almost every industry.
1. Profitability barely bottomed out in 2010.
2. Sales recovered at a rate that should be able to support higher profits.
3. Gross margin percentages deteriorated across the board. This reflects something of a "volume at any price" mentality that continued despite the sales increases.
4. Expense percentages fell almost universally as firms made serious structural changes in their operations.
5. Inventory turnover increases for most lines of trade.
6. Collection days rose, supporting something of a "don't make them mad, help them keep buying" approach.
We hope you find this helpful to your preparations for 2012. We look forward to seeing you at the April convention in Las Vegas.Â Dr. Al Bates, president of PPG, a featured presenter at NAHAD's UID in a Day program.
About the Author:
Dr. Albert D. Bates is founder and president of Profit Planning Group, a distribution research firm headquartered in Boulder, Colorado.
Copyright 2011 Profit Planning Group. NAHAD has unlimited duplication rights for this manuscript. Further, members may duplicate this report for their internal use in any way desired. Duplication by any other organization in any manner is strictly prohibited.
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