For many years, virtually every study that I worked on that dealt with profitability and productivity strongly indicated that smaller $$$ volume firms, as a general rule, tended to be more profitable than larger $$$ volume firms, at least in terms of percentages.
As an example, 10 years ago, the top 25% of the industry (in terms of profitability) reported average sales of $961,500 and owner’s compensation of 23.3%. The SPE of this group was $125,644.
The bottom 25% in terms of profitability reported sales of $1,098,541, owner’s compensation of 4.2% and an SPE of $109,689.
Move forward to 2013 and the top 25% reported average sales of $925,849, profits of 24.6% and an SPE of $142,372.
The bottom 25% reported average sales of $1,070,548, profits of 4.81% and an SPE of $114,858.
Data Indicates Possible New Trend?
However, in a recent survey dealing with time management that we just completed, it appears that firms who classified themselves as high profit firms reported significantly higher sales and SPE than their peers who indicated they were at the bottom in terms of profits. I can’t help but wonder whether this is a fluke, or a real trend based upon various factors.
Here are the three breakouts we recently reported in our Time Management Practices article that appears as a free download on our National Printing Research Council website at www.printingresearch.org. (Three tables below)
Comparing Profit Leaders vs. Laggards
It was interesting to observe that out of the 207 participating firms, an almost identical number of owners described themselves as low profit as opposed to high profit firms. We appreciate the candor of the former in that their input is often just as important as what we receive from “profit leaders.”
Granted, there were only 20 participants in each of our ‘Top” and “Bottom” groupings, each representing 10% of our total respondents. Nonetheless, the data was clean with no unusual outliers that we could detect.
So the question that seems to arise is whether or not there is a good explanation for what appears to be a significant, and quickly developing trend that suggests there is a direct, though not necessarily linear, relationship between sales per employee and annual gross sales. Analyzed a bit further, we could examine two possibilities:
- Do highly trained & productive employees naturally facilitate and make it easier for firms to achieve higher and higher sales?
- Do firms with higher sales naturally tend to acquire more productive equipment thus leading to higher SPEs?
The response rate was very good, and the data was exceptionally clean, so the question remains – has there been a significant turn-around, almost a reversal, in this industry whereby firms with higher profits tend to be larger firms as well.
We tend to believe that the level of sophistication and higher levels of productivity offered by a variety of digital devices (printers, copiers, creasers, collators, available software,etc.) has enabled printing firms that have upgraded their equipment to achieve levels of productivity almost unheard of just a few years ago.
Conclusion
We welcome your feedback and would love to publish your comments on our website. Tell us what you think about the relationship between sales per employee and the production equipment currently available. Another question – should a company struggling with relatively low levels of productivity and only modest sales take a major financial risk and upgrade to more expensive and hopefully more productive equipment? Send us your comments and feedback to: mailto:www.printingresearch.org.
With your permission, we will append your comments to this article. Don’t be bashful… share with us your thoughts and opinions.
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