HVACRDB

Why Ignore the Profits

I want to begin this column with a confession. I've committed a venial sin. I hope for those of you with a more theological bent, you'll recognize this means it is a minor sin as opposed to some more grievous act.

For more than 10 years, I've heard the leadership at HARDI (and its predecessor) urging members to participate in the Profit Report. As an abstraction, it appears logical. You get to see the numbers – one of the most important glues that keeps a business together – and thus have the ability to draw some comparison with your fellow members, in a private, bloodless way.

The association cry has always been for more participation. We all know that the larger the sampling, the more "statistically significant" the data. I love that expression, "statistically significant," not so much because it makes a conclusion absolutely true, but because it implies that you're getting closer to the truth.

In June, because I was curious and wanted to see some performance numbers, I asked HARDI Vice President Talbot Gee if I could see the report. I simply wanted to have a sense of what it contained and, after all, how could I write about it if I didn't examine it?

Before my comments about what I found, allow me an observation. Throughout my years, I've heard many very sharp businesspeople tell me they didn't want any media coverage because they didn't want the competition to know what they were doing. I always nod politely, smile and say, "I appreciate your view." Usually, that ends the conversation. (Of course, I always tell them I'll check back in a year or so.)

Allow me a moment of bluntness. There are very, very few information, practices or techniques that competitors can't get from you in a legal or even illegal manner. If I needed to get solid information on a competitor, I'd look for someone with great reportorial skills and apply them to gathering business intelligence. There are dozens of ways, legal and ethical, to gain the information you want. It mostly takes digging and a bit of brains. (Yes, there also are illegal or unethical methods, but I'm not going to wade in that swamp.)

Another comment I frequently hear is: "I don't pay attention to my competitors." If I write, NONSENSE, some of my friends might find it impertinent. But everyone pays attention to competitors. It might not mean they slavishly follow their competitor’s activities, but everyone uses a gauge to judge their business. And, certainly, comparing yourself to your competitors – from market share, number of locations and lines carried – plays a role in your own strategic thinking.

Now back to the profit planning report. The contents of the 50-page report left me astounded. What impressed me particularly was the executive summary and its separation of a "regular" HARDI member and high-performance wholesalers. The range of separation can be eye-opening. The Profit Report provides, in black-and-white, the numbers in a wide range of business activities that allow you to have a real-world measuring stick about how you perform. If you're trying to do something new, and your numbers are better than average (something we all want), you have some feedback about how well you’re performing. Even more importantly, if your numbers are in the cellar for some part of your business, isn't that the slap-in-the-face that everyone wants? I would think it should be. For example, you get detailed information about strategic profit model ratios, financial ratios, asset productivity ratios, operating and employee operating ratios and much more.

I recognize there is concern about submitting private, sensitive material to a third party. I think it's fair to state that Alan Bates, Ph.D., and his Profit Planning Group have provided the type of confidentiality and impartial reports that we both expect and have confidence in.

The rules are simple. If you participate by sharing your information, you receive a full copy of the Profit Report, including a profit improvement profile comparing your firm with similar participating firms. The cost is a modest $500.00. (For nonmembers, $800.00.)

This begs a basic question: How could you NOT participate?

HVACR Distribution Business welcomes letters to the editor. Please send correspondence to:
Tom Peric, Editor
2040 Fairfax Avenue
Cherry Hill, NJ 08003
856/874-0049
or e-mail [email protected]

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