Termination Speed Impacts the Bottom Line
If a network cabling contractor can do a job faster than his competitor, he can bid lower, win the job, and still turn a decent profit. In an excerpt from a recent white paper, Siemon explains how termination speed impacts the bottom line.
As a network cabling contractor, you need to keep an eye on product costs. When it comes to the cabling products you choose, you’re balancing your customer’s needs against what works for your bottom line.
But, it is important to remember that not every bottom-line benefit can be measured in the product cost you see on your invoice. Sometimes, a product’s ability to make you more efficient can outweigh the purchase price. Termination speed is a great example. As a contractor, you know that labor costs are a major piece of a cabling project – an area where your customers may be looking to cut their own costs. So, it makes sense that if you can bid lower labor costs than your competition, you stand to win more business.
Of course, you can’t just go in there and slash your labor below the point of profitability. The key is driving labor efficiencies that give you the breathing room to profitably bid lower labor – simply put, you need to be able to get it done faster. If you can do the job faster than your competitor, you can bid lower, win the job, and still turn a decent profit.
Let’s look at an example of a basic Category 6 UTP job and how termination times impact your profits. In this sample, we’re looking at a theoretical 1000-drop Category 6 job. To make it easier, we’re just looking at the terminations, not pulling cable or testing – just terminating jacks. Obviously, this is a very simplified look at just one aspect of a project, but it does a good job of showing how the amount of time saved per jack can add up to significantly better profits and better chances of winning for you. Let’s start with actual termination times.
Outlet A can be terminated in one minute, outlet B in two minutes, and outlet C in three minutes. When it comes time to calculate a bid, you’re not going to base your labor estimate on the exact termination time – that would leave no margin for error and would be totally impractical in the real world.
So, let’s say you add two minutes to the actual termination time for each outlet to calculate your bid estimate (as you can see in the table below). While you’re estimating a lower labor cost on the bid for outlet A than for B or C, you are giving yourself more room between your actual termination time and your bid estimate. For outlet A, your bid estimate is three times higher than your actual time. Outlet B cuts it to two times, and outlet C leaves just a 60% cushion. That extra room can have a real impact on your profitability.
The potential benefits to your bottom line become clearer when your start putting it to hours and dollars (as in the table below, which continues the previous scenario). For outlet A, you calculated your bid on a 50-hour labor estimate, based on 1,000 outlets at three minutes each. At, let’s say, $65 an hour, that’s $3,250. That’s a good deal lower than both B and C – so you’re putting yourself in a strong position to win.
But if you look at your actual termination time, the job may only take a little under 17 hours. It would take you two and three times as long with outlet B and C. Even though you bid your labor significantly lower with outlet A, you are actually way more profitable, making around $195 per hour versus $130 and $108 for outlet B and C. By the time it is all said and done, you made as much money (and maybe more) with outlet A, but bid lower and won the job.
While the previous example might get you thinking about the benefit of faster terminations, what if you could terminate that Category 6 jack in just 30 seconds? Under the same exact scenario as before, the ability to terminate outlet A in just 30 seconds doubles your profitability. You’re making $390 an hour and absolutely killing your competitors. You’re doing the job in a little over eight hours compared to 50 hours for the poor guy who chose outlet C.
Let’s face it: While it is pretty easy to show you how banging out 30-second terminations can make you more profitable on your next job, actually doing it is another matter. In the real world, you rarely get a chance to work under best-case conditions where you can consistently achieve world-record termination times; you’re squeezed into tight closets, hunched under desks, or worse. Yet the point still remains that the faster you can terminate outlets, the more profitable you can be on the project. And, relatively speaking, a termination method that is twice as fast on a nice, clean workbench will be twice as fast on the job site.
To read this white paper in its entirety, click here.
For more information on Siemon products that can assist with termination speed, click here.
Author Brian Duval is channel marketing manager and inside sales manager for Siemon.