Benchmarking the ACPA: Part 1

by Barbara Nuss, CPA, author and project manager for the 2013 ACPA Financial Benchmark Survey

This year the American Concrete Pumping Association commissioned Profit Soup to study the financial results of its members. This is the first of a two-part article by study author Barbara Nuss, CPA. Ms. Nuss has managed benchmarking projects in many industries including equipment rental, crane rental and several specialty construction trades as well as a host of other business models through her work with trade associations and franchise organizations all over the U.S., Canada and Australia.

Envision this: The year is 2018 and you’re about to stand up and thank your team for a job well done. In the past five years your sales have increased an average of 10 percent per year, in spite of some down times. Your business is financially efficient and extremely profitable. You have a happy team of employees that manage the business with little oversight from you and you’re pleased with the amount of personal cash reserves you’ve built. As you reflect on where you’ve been, you say to yourself, “Everything changed when we really embraced managing by the numbers, setting stretch goals with rewards and accountability, and being clear with the entire team about our financial expectations.”

Your business must continually change, adapt and improve its efficiencies to build value. A culture of continuous performance improvement creates more profit now and more wealth in the future. When building a better business and improving profit and wealth is your goal, measuring performance is your starting point. That’s where the ACPA 2013 Financial Benchmark Study comes in.

The study is the first of its kind for the concrete pumping industry. “Our members have been asking for this type of information because they’ve felt the pinch of the recession and want to see how the best in the business have responded financially,” says ACPA’s executive director, Christi Collins. The study was published in June to further ACPA’s procompetitive purposes, providing members with a means to improve their efficiency and performance by emulating the best practices of other members. Members are already reporting that understanding the financial outcomes that are possible is helping them to strengthen their businesses.

Pat Inglese, president and founder of Pioneer Concrete Pumping headquartered in Atlanta, Georgia was one of the first twenty to participate in the study, making him eligible for a special one-hour consultation with study author, Barbara Nuss, CPA, of Profit Soup. “In our hour with Barb we discussed the financial assessment report that compares our results to the study averages and to companies near our size. Reviewing our report with Barb helped clear up some things we were already questioning at one of our branch operations. In our conversation, we identified four specific areas to work on. Before we had the study to compare to, we had a hunch things weren’t right. Now we can confirm we are on the right track with some things we had already implemented, and the study gave us some real targets to shoot for. We’ve already talked with Barb about doing an updated financial assessment for us next year so we can start measuring the improvement.”

The study measures the key financial indicators of business health aimed at improving the critical areas of productivity, profit, cash and financial strength. It puts the Profit Soup recipe for success in members’ hands:

MEASURE what’s important: the key benchmarks and drivers of success

UNDERSTAND what the information is telling you about your business and the results of your activities

GET IT DONE! Identify actions and create targets and accountabilities that lift business performance

The report includes results from 39 business units operating more than 800 boom pumps. Given that industry experts estimate there are 5,000 to 6,000 boom pumps operating in the U.S., approximately 15 percent of the operating capacity of the industry is captured in the study. For a first-year study this represents a great launch, having gathered sufficient responses for a valid data set that produces some extremely useful metrics.

The project consists of three components:

• The Benchmark Study, which summarizes the industry results and includes profiles for the top 25 percent, as well as results for companies at different sales levels
• The Business Improvement Guide, the educational supplement that suggests ways to use the benchmarks as a launch pad for improving company performance
• A confidential financial assessment for each participating company that highlights areas for possible improvement

Each participating member received these three resources free of charge. Members who did not participate can contact the ACPA to purchase a copy of the study, including the Business Improvement Guide, for $389.

The study validates the importance of efficient labor and equipment utilization and sets some specific targets based on what the best in the business achieved. The equipment utilization metrics published in the study include revenue per hour, per yard and per pour, and revenue per unit per day. Also included is hours billed per unit per day and equipment utilization rate (hours billed as a percent of equipment hours available). All of these metrics are calculated for the company overall, as well as by type of equipment (boom size).

In addition to equipment utilization, the study includes metrics designed to help members focus on areas that build business value by answering these questions:

How productive are you? Equipment utilization metrics and direct labor utilization including costs per hour and as a percent of sales. Also includes costs and productivity measurements for selling and administrative staff

How much profit are you earning? Detailed average direct costs, gross profit on concrete pumping, sales and administrative payroll expense as a percent of sales, selling, general and administrative expenses, operating profit percent, owner’s discretionary profit

How well do you produce and manage cash? Current ratio, EBITDA, accounts receivable collection days, accounts payable days

How financially strong are you? Sales to assets, return on investment, debt to worth

For each metric, we’ve published results for all participating companies, just the top 25 percent, and for companies in sales categories of less than $2 million, $2 to $6 million and more than $6 million.

In my next article we’ll describe in more detail the most common areas where improvements can be made, including reasonable targets, action plans and an accountability process that works.