Question: Should I expect the cost of good ratios to be the same as HVAC in my new electrical department?
Drew Cameron; President, HVAC Sellutions & Energy Design Systems, Inc:
I’d probably say no. They’re different scopes of work and you probably have different people doing those jobs. You probably won’t be as efficient at doing work in your new electrical department as you are in your long-term HVAC department. You probably don’t have the proven systems and procedures in place in your new electrical department as you do in your existing HVAC department. So, the short answer is no based on the scope of work.
Next, what is the scope of work within your new electrical division? I see some companies out there that are heavy in electrical service and not big on install – things like fixtures, fans, or generators. Generators are a big-ticket item and they’re not really an electrical service. Then you might want to think about having an electrical install department. If you log in to the EGIA member dashboard, you’ll be able to search for “electrical” and “KPIs” and find resources that will help you see what those ratios should be.
Gary Elekes; Founder, EPC Training:
I agree with Drew. No, they’re not the same. It depends on your mix. Your mix will always drive what those numbers look like on your cost of goods sold, your productivity, your gross profit dollars per man day, etc. So, if you’re a high-material, low-labor type of business, obviously you’re going to have a higher cost of material than you would compared to labor. If you’re a high-labor, low-material type of company – like a service business – those numbers would flip around.
Again, the costs are going to be completely interdependent on your pricing. If you’re running that service business and you’re underpriced, you might look at your labor and not understand how you could hit that labor component. So, typically the answer is found in productivity, efficiency, and your labor cost. There’s a tremendous number of things that go into these numbers.
The KPIs are all about benchmarking your company and giving yourself a map of how to grow. If you’re hitting those KPIs, great. If you’re coming in below those KPIs, you can start to look at the factors influencing that and investigate ways to improve.
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