2015 chicago conference presentation final
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Advice for Achieving the Benefits of Benchmarking
Caryl Coronis, CPACFONBG Constructorscarylc@nbgconstructors.com
Steve Shipp, CPAVice President of FinanceHGC Construction Co. sshipp@hgcconstruction.com
Fern OramDirector, Content Marketing & CommunicationsCFMAforam@cfma.org
Billy Stockton, CCIFPControllerSite Specific, LLCbs@sitespecificllc.com
Jennifer Miloszewski, CPASenior ManagerBlue & Co., LLCjmiloszewski@blueandco.com
Damien Strohmier, CPAManagerBlue & Co., LLCdstrohmier@blueandco.com
CPE Codetaxes
Learning Journal page 8
What’s our agenda?Signed,Just Waking up in Chicago
AGENDA
We’ll be taking answers to these (and other!) burning Benchmarker questions:
• What were the results from the 2014 Survey and how can I find them in the Benchmarker?
• I am wondering where have all the workers gone?
• I understand what Best in Class companies’ ratios look like, but my company isn’t quite there yet. What to do?
• I’ve seen your results for many years from afar but felt like I couldn’t approach you. How can I fall in love with you and use you every day?
What were the results from the 2014 Survey and how can I find them in the Benchmarker?Signed,Needing Numbers Now in Nashville
688 Respondents between May and August 2014600 complete financial data submissions
35% Industrial & Nonresidential contractors
19% Heavy & Highway contractors
44% Specialty Trade contractors
2% Other
Respondent Profile
Under $10 22%
$10-2523%
$25 - 5019%
$50 - 10017%
$100-30015%
Over $3004%
Respondent Revenue in Mil-lions ($)
Northeast14% Southeast
11%
Midwest19%
Southwest9%
West10%
Far West37%
Respondent Headquarters Loca-tion
Expected Sales Volume Decrease2010 43%2011 27%2012 17%2013 4%2014 15%
Expected Sales Volume Increase2010 27%2011 47%2012 54%2013 60%2014 53%
Sales Volume Expectations
2013
2014 Challenge
%
Challenge
%
Healthcare insurance costs
25% Shortage of trained field help
39%
Sources of future work 20% Sources of future work 24% Shortage of trained field help
19% Healthcare insurance costs
13%
Material costs 19% Lack of qualified project managers
13%
Lack of qualified project managers
17% Financial condition of federal, state or local government
11%
Top Five Greatest Challenges
2014 Financial Survey Results Gross Profit is below
average for the past five years
Gross Profit increased from 9.1% in 2013 to 9.4% in 2014
The five year average is 10.1%
Net Income is below average for the past five years
Net Income increased from 2.1% in 2013 to 2.5% in 2014
The five year average is 2.7%
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
9%
12%
6%
15%
9.4%
11.1%
6.5%
14.2%
10.1%
11.5%
6.7%
15.5%
2013 2014 5 Yr Avg
% o
f Re
venu
e
Gross Profit as % of Revenue
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2%
3%
1%
3%
2.5%
3.7%
1.7%
3.2%
2.7%
4.3%
1.9%
2.7%
Net Income as % of Revenue
2013 2014 5 Yr Avg
% o
f Re
venu
e
Compare All Survey Respondents with the Best in Class Performers Using the Five Key Ratios:1. Return on Assets2. Return on Equity3. Fixed Assets to Net Worth4. Debt to Equity5. Working Capital Turnover
2014 Survey Financial Results and Best in Class Performance
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
5.0% 4.5% 4.4%
6.8%
17.6%16.8%
14.4%
19.7%
6.2%5.6% 5.5%
7.9%
17.3%
15.7%
13.1%
19.5%
Return on Assets 2013-2014
2013 All 2013 BIC 2014 ALL 2014 BIC
Retu
rn o
n As
sets
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
14.2%
10.9%
16.4%
37.5%40.2%
27.5%
50.1%
14.1%17.3%
11.1%
19.9%18.5%
44.1%
29.8%
44.3% 45.4%
Return on Equity 2013-2014
2013 All 2013 BIC 2014 ALL 2014 BIC
Retu
rn o
n Eq
uity
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0
10
20
30
40
50
60
23.4
53.9
13.1
23.8
10.7
37.4
8.3
13.4
24.8
53.9
13.9
24.1
12.7
40.8
8.1
12.7
Fixed Asset Ratio 2013-2014
2013 All 2013 BIC 2014 ALL 2014 BIC
Fixe
d As
set
Ratio
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0
0.5
1
1.5
2
2.5
3
1.5
1
2.2
1.11.1
0.9
2.1
0.9
1.6
1.1
2.5
1.31.3
0.7
2.1
1.2
Debt to Equity 2013-2014
2013 All 2013 BIC 2014 ALL 2014 BIC
Deb
t to
Equ
ity
All Companies Heavy & Highway Industrial & Nonresidential Specialty Trade0
2
4
6
8
10
12
14
16
9.6
8
13.6
7.1
10.3
9
15.2
8.29
7.3
13.3
7.9
9.7
5.5
14.6
8
Working Capital Turnover 2013-2014
2013 All 2013 BIC 2014 ALL 2014 BIC
Wor
king
Cap
ital T
urno
ver
Working Capital Turnover Return on Assets (%) Return on Equity (%) Debt to Equity Fixed Asset Ratio (%)
9.06.2
17.3
1.6
24.8
9.7
17.3
44.1
1.3
12.7
All Companies Best In Class
2014 Key Ratio Performance
I am wondering where have all the workers gone?Signed,Hot Topic Curious
Combatting the Shortage of Skilled Trade Workers
404 Responding Companies
Percent of CompaniesLosing Skilled Trade Workers
Yes43%
No57%
Percent of Companies Losing Skilled Trade Workersto the Following Areas
58.9%
13.3%
37.8%
59.4%
13.9%
3.9%
How Will a Shortage of Skilled TradeAffect Company in 2015?
More difficult to recruit
Will effect bidding
Increase overtime budget
0.010.020.030.040.050.060.070.080.090.0
81.4%
37.9%32.8%
Steps Taken to Address the Shortage of Skilled Trade Workers
Partner with skilled trade program
s
On-the-job-training program
Educational reimbursement
Referral bonuses
051015202530354045
38.8% 39.4%
21.2%25.3%
Percent of Companies Using the Following Types of Outreach in Recruiting Skilled Trade Workers
Print media
Job fairs
Local union hall
Recruiters/Employem
ent Agencies
Social media
Employee referrals
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
40.8%32.5%
50.3%
33.7% 32%
62.1%
Most Successful Recruiting or Retention Tool Used by Companies
Above market compen-sation/benefit package
Employee ownership Work/life balance Limited overnight travel0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
45.5%
4.9%
18.3%
6.3%
What Is the One Perception Companies Would Change about the Industry’s Image to Improve the Worker Shortage Situation?
Income & retirement Not valued or respected0.0
10.0
20.0
30.0
40.0
50.0
60.0
18.7%
49.5%
HOT TOPIC 2015THE EMPLOYER/EMPLOYEE
VALUE PROPOSITION
Meeting Cultural NeedsManaging Compensation
ExpectationsCareer Development
Retention Tools
I understand what Best in Class companies’ ratios look like, but my company isn’t quite there yet. What to do?Signed,Striving for Success
Sureties and Bankers Focus onAbility and resources to perform the workEarningsLiquidity and leverage
Impacting the Ratios
Ability and Resources to Perform the WorkCapacity
PersonnelEquipment
Months in backlog
Impacting the Ratios
EarningsNet Income
Must make money to be successfulEBITDA
Lending on the ability to create cash flowGross Profit Gain Fade History
Impacting the Ratios
Liquidity and Leverage
Common ratios
Use the above as targets to gauge internal Key Performance Indicators.
Impacting the Ratios
Optimal Range
Working Capital Turns 8 – 12 times
Debt to Equity <3:1
Net Worth Turns 6-8 times
Is There a Quick Fix? No and Maybe…
Forecast operation for negotiating?Utilize business partners with industry
experienceBenchmark yourself against others within and
outside your line of businessUnderstand how you are being measured and
communicate with your business partners
Short-Term Solution
Equipment UtilizationDo you have too much equipment?
Underutilization impacts profitability, less liquidity and lower working capital
Capital budget or reactionary?BUT, I need excess equipment for:
Downtime for maintenance or repairsTaking on bigger contracts
Long-Term Fixes
Increase Net Worth45% is going to taxesWhat should we retain in the business?
Company’s strategic plan over the next 5 yearso New division? o Top line growth? o Expanding into a new region?
Long-Term Fixes
Improve LiquidityIntegrate project management into billing and
collectionsFront load schedule of values and timely
billingNegotiate retainage down
One way to make a strong financial work for you!Make more money!
Long-Term Fixes
Bottom to Top Approach for Lasting ImpactGoals for your first level of management
1 – 2 key items they need to report on and deliverDesign a performance management system that
delivers a consistent message and cultureGreatest and most immediate impact to
operationUnique dashboards for different levels of
management
Impacting the Ratios
Our outside accountants are preparing our financial statements. They said that we have to show comparisons to similar businesses of the same type and size. HELP!Signed, Accounting in Albuquerque
My company is envious of other companies’ profits. How can I reassure everyone that our profits measure up?Signed,Wishful Thinking in Walla Walla
My company would love to compare favorably with Best in Class companies. How do we do that?Signed,Comparing in Cleveland
We are trying to get an SBA loan but there are so many questions! How can we prove that our plans for the loan are justified?Signed,Praying in Providence
We use a construction specific ERP accounting system. Our company spends a lot of money on it too! How we can use our software more effectively?Signed,Bean Counting in Boston
Leverage the Existing Capabilities of the Software
Implement Best in Class Processes Created Additional Consulting Work
I’ve seen your results for many years from afar but felt like I couldn’t approach you. How can I fall in love with you and use you every day?Signed,Rhode Island Romeo
www.financialbenchmarker.com
CFMA’S CONSTRUCTION FINANCIAL BENCHMARKER
Benchmarking That’s Online, on Demand, and on Point!
Benchmarker Reports
Peer Group Comparison Report
Performance Graphs
Company Report Card
Customized Comparison Report
All Financial Survey Online Questionnaire Participants will receive: TWO FREE Peer Group Comparison Reports My Company Performance Report--available only to
Financial Survey Online Questionnaire Participants!
My Company Performance Report
COME VISIT US!Booth 122
CPE Codetaxes
Learning Journal page 8
I want to sing your praises to everyone back at my company! Do you have a theme song?Signed,Southwest Songbird
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