2014-2015 Financial Benchmarking Study NPOA Survey Profiles Members ... and quick printers made the founders’ first order of business to ... • “Ilike the group of people who

Published by NPOA Copyright © 2014 NPOA and QP Consulting, Inc. Executive Summary Page 1 All Rights Reserved

B O O S T I N G P R O F I T A B I L I T Y & S A L E S S E R I E S

Proudly Sponsored by

2014-2015

PUBLISHED BY NPOA & Q.P. CONSULTING, INC. COPYRIGHT 2014 NPOA

FinancialBenchmarking Study A comprehensive analysis of key financial

benchmarks and ratios for the quick and small commercial printing industry.

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Owner’s Compensation Percent Achieved in 2011

PROFIT DISTRIBUTION of PARTICIPANTS

0%5%

10%15%20%25%30%35%

1983 1991 2001 2009 2011

HISTORICAL ANALYSIS OF GENERAL EXPENSES

Cost of Goods29.1%

Payroll Costs31.4%

Overhead Expenses26.9%12.6%

Owner’sComp.

NPOA

Benchmarking Study

Executive Summary!

NPOA is the fastest-growing trade association in the graphic communications industry, serving the needs of companies offering printing, copying, mailing and sign-making services.

NPOA’s mission statement is simple, yet ambitious. The National Print Owners Association is dedicated to delivering a variety of products and services that enhance the growth and profitability of its members through advocacy, educational programs, publications, research, and the sharing of technical information. We seek to serve a broad audience involved in the graphic communications industry, which includes printing and copying firms, and those firms offering mailing services, sign-making and large format printing.

We invite you to join our fast-growing association.

We look forward to providing you with services and programs that will help you boost your firm’s sales and profits in the next 12-18 months.

Visit www.printowners.org today for additional information.

NatioNal PriNt oWNers associatioN2110 S. Dairy Road • W. Melbourne, FL 32904 • 321-727-2444 • Fax [email protected] • www.printowners.org

Published by NPOA & Q.P. Consulting, Inc.

-1-

Copyright © 2013 NPOA

NatioNal PriNt owNers associatioN

2110 South Dairy Road • West Melbourne, FL 32904

321-727-2444 • Fax 321-727-2166 • www.printowners.org

Results are in from NPOA’s recent-

ly-concluded preliminary survey of

Workers’ Compensation rates in our

industry, and the findings are prov-

ing to be a real eye-opener in terms

of rates being paid and classifications

being used.

Workers’ Compensation insurance

rates are regulated and established

solely at the state level. Most states

(and the insurance companies provid-

ing coverage within these states) rely

on a classification system devised and

maintained by the National Council

on Compensation Insurance or NCCI.

There are, however, a handful of

states that do not use the NCCI classi-

fication system, choosing instead to use

their own. Those states are: California,

New Jersey, New York, Delaware,

Massachusetts, and Pennsylvania.

There are still other states that, while

relying on the basic NCCI system, have

chosen to make major modifications to

An NPOA Special Report

July 22, 2013

Workers’ Compensation in the “Quick” Printing Industry

many of the NCCI classification rules.

Texas is one of those states.

As an example, Texas may use a

suggested NCCI code but has reserved

the right to either broaden or narrow

what is included under that code.

Other states such as Pennsylvania

and Illinois, while relying in large

measure on NCCI classifications, have

created their own “special classifica-

tion codes” for certain industries. As

a result, these codes do not appear in

the NCCI list.

NCCI Classification System

Generally speaking, the NCCI clas-

sification system attempts to classify

the overall business enterprise of an

employer, not the particular work per-

formed by specific employees - at least

that’s the theory.

In practice, however, NCCI and the

states relying on the NCCI classifica-

tion method, allows for exceptions

based upon the work being done, thus

resulting in numerous classification

codes being assigned to individual

companies.

The most common exceptions allow

for some employees to be classified

as “clerical,” “outside sales,” and

“drivers.”

The result being that while a compa-

ny may have a relatively high exposure

rate (roofing, window glass installers

and printing), they may be allowed to

use much lower rates for employees

performing primarily clerical duties,

outside sales and deliveries.

As additional background to this

entire system is the fact that the NCCI

is largely funded by insurance compa-

nies with insurance industry executives

making up the vast majority of its

board members. Although NCCI pro-

claims its “independent” status, many

question this status as being one of the

“fox guarding the chicken coop.”

NCCI has chosen not to provide

the business community with an easy

and free lookup method for check-

ing specific classification codes or

descriptions, choosing instead to sell

this service. However, we have found

a number of sources where such infor-

mation can be found.

Useful Websites for Checking

Workers’ Compensation Data

One of these sites is located at

https://www.wcrb.org/wcrb/classcode/

main.asp. This site is maintained by the

state of Wisconsin, and while it tracks

and reports Workers’ Compensation

(This study is based upon preliminary results obtained from an NPOA survey conducted in late June and early

July 2013. We received surveys from 122 companies, and 238 specific Workers’ Compensation quotes.)

NPOA WORKMANS’ COMPENSATION

INSURANCE INDEX

NPOA Workman’s Index

Insufficient Data

<= $0.40/$100

$0.40 - $0.60/$100

$0.61 - $0.90/$100

$0.91 - $1.25/$100

$1.26/$100 or higher

First NPOA Survey Profiles Members and What They Expect in Services

When the National Print Owners Association (NPOA) was officially launched in mid-December 2012, the founders were hoping for a good response. The rush of sign-ups was more than they had ever anticipated. Today, less than two months after the launch, membership has reached well over 250 and continues to grow.

The unexpectedly strong response from small commercial and quick printers made the founders’ first order of business to determine the five “Ws” of journalism – Who were these peo-ple, why were they joining, what did they expect from NPOA, where were they located, and when did they get into the print-ing business?

“We realized very early on that we needed to identify these new members and to determine their wants and needs,” says NPOA President Jace Prejean. “If we were to be successful, we needed to do more than take a simple headcount and collect dues. We also wanted to gather this member profile informa-tion to share with other incoming association members to give them a snapshot profile of their peers.”

The upshot of this decision was a comprehensive survey of the 130 earliest joiners. Here is a summary of the results.

Why Did You Join NPOA?In general, the survey found that members were looking

for networking opportunities, industry information, and ven-dor discounts, along with financial, marketing, operational, technical, and human resources assistance. We will look more closely at those areas, but meanwhile here is a very brief sam-ple of the dozens of comments from printers about why they decided to join NPOA:

• “To join a peer network to help grow, evolve, and ex-pand my printing company.”

NATIONAL PRINT OWNERS ASSOCIATION2110 South Dairy Road • West Melbourne, FL 32904


2013 NPOA Membership Profile ReportBy Bob Hall

• “I like the group of people who started NPOA. NAQP was not working for me so we left last year and I was looking for a group of small printers.”

• “My primary reason is to join a group of my peers who still have a passion for the printing industry. I also have a great respect for the leaders of this group, many of whom I have met over the years.”

• “I love being around thoughts, ideas, and insights from guys and gals who are coping with the immense chang-es occurring in our industry.”

• “We were interested in an association that might better relate to the needs of a smaller print shop than what we currently have through NAPL.”

• “I see in NPOA the first ‘grass roots’ industry organiza-tion since the earlier days of NAQP, and that's refreshing.”

• “To have an option other than NAQP/NAPL, (one) that speaks more to shops our size and run directly by own-ers who operate in the trenches each day and better understand the reality of our business.”

• “To get back to an organization that is about the little guy and not just the big guys.”

Published by NPOA Page 1 Copyright © 2013 NPOA

DISTRIBUTION OF MEMBERSHIP – One of the most popular features of the NPOA web site at www.printowners.org is a map depicting approximate locations of all members. Visitors can click on individual flags and see the name and city where each member is located. The map is up-dated approximately once a week. We now have members in Alaska and Hawaii, as well as in Australia and Ecuador.

DISCLAIMER AND NOTICEThe Financial Benchmarking Study - 17th Edition, published jointly by NPOA and Q.P. Consulting, Inc., represents a compilation of financial data pertaining to various sales, expenses and profits reported by survey participants. This Study reflects financial ratios and performance for the fiscal year 2013.

May 2014

PUBLISHED BY NPOA & Q.P. CONSULTING, INC. COPYRIGHT 2014 NPOA

B O O S T I N G P R O F I T A B I L I T Y & S A L E S S E R I E S

Proudly Sponsored by

2014-2015

FinancialBenchmarking Study A comprehensive analysis of key financial

benchmarks and ratios for the quick and small commercial printing industry.

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10%15%20%25%30%35%

1983 1991 2001 2009 2011


WHERE THE MONEY COMES FROM

Cost of Goods29.1%

Payroll Costs31.4%


Owner’sComp.

Retail Price: $225.00NPOA Member Price: $135.00

WARNING NOTICE: As can be seen by reading the notice at the bottom of this page, as well as the notice appearing on every page

that follows, this document is fully protected under U.S. Copyright laws, and as such you have certain legal rights and legal obligations.

Rights You Have — You have the absolute right to make copies of this report for your personal records and you have the right to distribute one or more pages to supervisors and employees under your direct and immediate control. If you are in an editorial position, you may have the right to quote information contained in this report, but only so far as the use of quoted material or references does not diminish the value of this study to either participants and or potential purchasers of this study. If you have any questions whatsoever as to allowable “fair use” you are encouraged to contact the publishers directly.

Rights You Do Not Have — You do not, however, have the right to make copies of this study and distribute this information to other employers, owners, officers, or employees of other corporate entities, organizations or associations not under your direct control. The publishers of this study have a substantial financial investment in the preparation and publication of this document and we have every intention of protecting these rights and prosecuting violations of our rights under U.S. Copyright statutes.

Once again, if you have any doubts as to either your rights or your obligations, please contact the publishers.

COPYRIGHT NOTICE

Copyright 2014 by Q.P. Consulting

All rights reserved. Except as permitted under the United States Copyright Act of 1976, reproduction or distribution of this document or any portion thereof, in any form or by any means, without the written consent of the copyright holders, is strictly prohibited. Violators of this copyright notice will be prosecuted to the fullest extent allowed under applicable federal statutes!

INTRODUCTION 2014-15 FINANCIAL BENCHMARKING STUDY


TABLE OF CONTENTS 2014-15 FINANCIAL BENCHMARKING STUDY

TABLE OF CONTENTS

Introduction ................................................................................................................................................vExecutive Summary.................................................................................................................................viiExtraction Criteria and General Notes .....................................................................................................xx

SECTION 1 – Profile of Survey Respondents - At a Glance Financial Benchmark Study at a Glance ............................................................................................ 3 General Summary Page ..................................................................................................................... 5

SECTION 2 – Summary Profit & Loss Statements All Firms Summary ............................................................................................................................. 9 Single vs. Multiple ............................................................................................................................. 10 NPOA Members vs. Non-Members ...................................................................................................11 Printing Only vs. Copying Only Firms ............................................................................................... 12 Analysis by Percentage of Brokered Sales ...................................................................................... 13 Analysis by Number of Outside Sales Representatives ................................................................... 14 All Firms by Sales Volume ................................................................................................................ 15 Firms by Percent of Copying Sales .................................................................................................. 16 Firms by Population Density ....................................................................................................... 17, 18 Firms by Geographic Location .......................................................................................................... 19 Peer Group Membership .................................................................................................................. 20

SECTION 3 – Summary Profit & Loss Statements by Profitability Quartiles All Firms by Profitability Quartiles ..................................................................................................... 23 All Independents by Profitability Quartiles ........................................................................................ 24 All Franchises by Profitability Quartiles ............................................................................................ 25 All Firms by Profitability Quartiles (Sales $250,000-599,999) .......................................................... 26 All Firms by Profitability Quartiles (Sales $600,000-1,999,999) ....................................................... 27 All Firms by Profitability Quartiles (Sales $2-5 Million) ..................................................................... 28 All Firms by Profitability (With no outside sales reps) ....................................................................... 29 All Firms by Profitability (With >= 1 outside sales reps) ................................................................... 30

SECTION 4 – Summary Balance Sheet Statements All Firms Summary ........................................................................................................................... 33 Single vs. Multiple ............................................................................................................................. 34 NPOA Members vs. Non-Members .................................................................................................. 35 Printing Only vs. Copying Only Firms ............................................................................................... 36 Analysis by Percent of Brokered Sales ............................................................................................ 37 Analysis by Number of Outside Sales Representatives ................................................................... 38


TABLE OF CONTENTS 2014-15 FINANCIAL BENCHMARKING STUDY

All Firms by Sales Volume ................................................................................................................ 39 Firms by Percent of Copying Sales .................................................................................................. 40 Firms by Population Density ....................................................................................................... 41, 42 All Firms by Geographic Location ..................................................................................................... 43 Analysis by Peer Group Membership ............................................................................................... 44 All Firms by Profitability Quartiles ..................................................................................................... 45 All Independent Firms by Profitability Quartiles ................................................................................ 46 All Franchise Firms by Profitability Quartiles .................................................................................... 47 All Firms by Profitability Quartiles (Sales $250,000-599,999) .......................................................... 48 All Firms by Profitability Quartiles (Sales $600,000-1,999,999) ....................................................... 49 All Firms by Profitability Quartiles (Sales $2-5 Million) ..................................................................... 50 All Firms by Profitability (With no outside sales reps) ....................................................................... 51 All Firms by Profitability (With one or more outside sales reps) ....................................................... 52

SECTION 5 – Summary Key Ratio Extractions All Firms Summary ........................................................................................................................... 55 Single vs. Multiple ............................................................................................................................. 56 NPOA Members vs. Non-Members .................................................................................................. 57 Printing Only vs. Copying Only Firms ............................................................................................... 58 Analysis by Percent of Brokered Sales ............................................................................................ 59 Analysis by Number of Outside Sales Representatives ................................................................... 60 All Firms by Sales Volume ................................................................................................................ 61 Firms by Percent of Copying Sales .................................................................................................. 62 Firms by Population Density ....................................................................................................... 63, 64 All Firms by Geographic Region ....................................................................................................... 65 Analysis by Peer Group Membership ............................................................................................... 66 All Firms by Profitability Quartiles ..................................................................................................... 67 All Independent Firms by Profitability Quartiles ................................................................................ 68 All Franchise Firms by Profitability Quartiles .................................................................................... 69 All Firms by Profitability Quartiles (Sales $250,000-599,999) .......................................................... 70 All Firms by Profitability Quartiles (Sales $600,000-1,999,999) ....................................................... 71 All Firms by Profitability Quartiles (Sales $2-5 Million) ..................................................................... 72 All Firms by Profitability (With no outside sales reps) ....................................................................... 73 All Firms by Profitability (With one or more outside sales reps) ....................................................... 74

APPENDIX Financial Benchmarking Survey Worksheet ..................................................................................... 77 2014/2015 Profitability Worksheet .................................................................................................... 83


INTRODUCTION

May 16, 2014

Dear Reader,

It is with great satisfaction that NPOA is able to provide you with a PDF or a hard-copy of our just-released NPOA 2014-2015 Financial Benchmarking Study. Previously titled or identified as an operating ratio study, this 90+ page report covers fiscal year 2013 and represents the detailed input of more than 150 firms that chose to participate in our survey.

We want to express our sincere appreciation to Ricoh-USA for their sponsorship and financial support for this critical industry study. Ricoh’s sponsorship, as well as their Gold Sponsorship at our 2014 Owners Conference in Ft. Lauderdale, has played a significant role in the growth of NPOA. Thank you Ricoh.

This Financial Benchmarking Study is one of the most thorough financial analyses ever published in the “small format” or “quick printing” segment of the printing industry. In addition to providing more than 120 unique Profit & Loss and Balance Sheet reports, this year’s study also includes approximately 20 pages detailing more than 1,200 key financial ratios broken down by association membership, independent vs. franchise status, percent of copying sales, firms with and without sales representatives, profitability plus dozens of other breakouts.

We have also included with this year’s study our popular “Respondents at a Glance” section, plus a useful “Profitability Worksheet” at the end of the study – a worksheet designed to help you make notes that will hopefully lead to increased profitability at your firm. As it has in the past, this key study also includes an excellent Executive Summary written by industry consultant, author and financial expert Larry Hunt. Hunt’s summary should be the first thing you read before delving into the remainder of the study.

We want to thank you for participating in the study and/or purchasing it at a later date. If you are not currently a member of NPOA, the printing industry’s fastest growing trade association, then we hope you will visit our web site at www.printowners.org and consider joining our association the near future.

Sincerely,

Jace Prejean, Bayou Printing & Graphics John C. Stewart, Executive DirectorPresident, National Print Owners Association National Print Owners Association, Inc.

NATIONAL PRINT OWNERS ASSOCIATION2110 South Dairy Road • West Melbourne, FL 32904



Benchmarking Study Page v




The opinions expressed in the Executive Summary are those of the author alone, and do not, in any way,reflect the opinions, suggestions, or recommendations of either NPOA or Q.P. Consulting., Inc.

Financial Benchmarking Study - 17th EditionEXECUTIVE SUMMARY & COMMENTS

By: Larry Hunt


IntroductionThe intent of this executive summary is to highlight the significant facts uncovered in the study. It is designed to be a

quick overview. Further detail about any item can be found in the body of the study. These studies have been conducted every two years since the early 1980s. They have provided a wealth of information about trends in such areas as: Sales volume; Company profitability; Mix of products and services offered; Sales per employee; Sales per square foot; Cost percentage for payroll, rent, etc; and many, many more important factors in running a successful business.

It is important to note that many of the firms reporting for this study are not the same companies that completed the survey two years ago. Therefore, it is important not to attach too much significance to minor variations or changes from one two-year period to the next. With that said, these Benchmarking results give us our best look at the health of this industry. It does indeed show broad trends as well as significant differences among various categories.

To give you an idea of how a different mix of respondents can change the outcome, consider the results from this study. It will show that annual sales volume declined by 5.8% from 2011 to 2013. BUT, when I looked back on the annual sales volume for 2011 for the 136 companies that participated this year, it showed that their average was $1,074,433 and their 2013 annual sales volume of $1,132,253 was actually an increase of $57,820 or 5.4%. So, the sales decline in 2013 appears to be simply the result of a different mix of respondents than in 2011.

Another point I’d like to make here is about the increase in Net Owner’s Compensation on these results as compared to the last few years. Since it was up about 2 percentage points on these results, I wanted to make sure that this was a real increase. So, I had the numbers crunchers do a couple of tests to confirm the validity of the data.

I had them take the 136 responses and split it into 3 batches of approximately the same size. I was pleased to see that the results were very similar for all three batches. I then had them split the responses into two categories. The first was a group of 65 companies who had responded to both the 2011 and the 2013 surveys. This group came in with a Net Owner’s Compensation percentage of 13.9%. The other 71 companies (new in 2013) came in with a Net Owner’s Compensation of 13.5%. The average of the study was 13.67%, which was a little more than 2 percentage points higher than in 2011.

So, at least this mix of companies appears to do a little less sales volume but they seem to make a somewhat higher level of profit than those who responded in 2011.

RecapFollowing are some general comments about these results:All Firms – There were a total of 136 usable responses in these results. This consisted of 117 companies who were

Independent firms and 19 participants who were members of a Franchise organization. Most participants are single shop operations with 125 companies in this category. Only 10 firms indicating that they were operating multiple shops.

30 Years Of Industry Trends (1983 to 2013)Over the 24 years from 1983 to 2007, the industry had seen a steady increase in annual sales volume. In the early years,

the growth was often 5% or 6% per year. In the decade from 1997 to 2007, it tended to be an annual growth of anywhere from 2% to 5%. But, in each of those two-year study results, there WAS some growth.

Benchmarking Study Page vii



Then we ran into the 2009 survey results and saw a very large decline of 14% over that two-year period. This was most probably the result of the bad economy at the time, which adversely affected the printing industry along with most every other industry. Since 2009, the last two studies have shown mixed results, with an increase in 2011 and now a decrease in 2013.

To recap, average sales volume has been in a range from about $1 million to $1.2 million from 2003 right up to the current results that are included here. I think this is reflecting the fact that many struggling companies are leaving the industry and that is helping to keep the average sales volume up. But, at the same time, the maturity of the industry is making it difficult for the current companies to increase sales.

The following table shows the change in annual sales volume over the past 10 years:

SALES VOLUME HISTORY OF PARTICIPANTS Year Average Sales Change 2003 $1,010,864 2005 $1,079,031 +6.7% 2007 $1,181,915 +9.5% 2009 $1,016,939 -14.0% 2011 $1,202,058 +18.2% 2013 $1,132,253 -5.8% 10 year change +$121,389 +2.3% average annual compound growth rate

Now for the GOOD NEWS!The Net Owner’s Compensation percentage on these results is the highest that it has been in more than 10 years. As

you will see in the study results for all firms, the average Net Owner’s Compensation came in at 13.67%. The only other reading above 13% in the past 10 years was in 2005 when it came in at 13.4%. As a matter of clarification, in the Quick Printing Industry and on these study results, Net Owner’s Compensation is defined as “that money which is left over after covering all expenses of the business, but before paying one working owner a salary or giving that owner any fringes.”

I’d like to make some important clarifications regarding the above definition. As pointed out, only one working owner should be excluded from the payroll expenses of the business. If there are two or more working owners, an appropriate wage and fringe package (for these additional owners) should be included in payroll costs. This will allow all participating companies to be compared on an equal basis.

In arriving at Net Owner’s Compensation, the cost for Depreciation and Amortization are considered expenses of the business. While these are often added back in by owners in arriving at their Owner’s Discretionary Income (See the Key Ratio section), they are not considered a part of Net Owner’s Compensation. Again, this is done in order to allow us to compare all participants on an equal basis.

So, with the above definition and clarification out of the way, let’s get back to the GOOD NEWS about increased profitability. While the sales volume was down by 5.8% (as shown earlier), the increase in Net Owner’s Compensation percentage easily made up for this decline and caused Net Owner’s Compensation Dollars to increase by $16,319 (from $138,503 in 2011 to $154,822 on these results).

While I was very pleased to see a nice increase in the Net Owner’s Compensation percentage, I was surprised by the factors that caused this increase. In the past, typically the primary cause of a change in Net Owner’s Compensation percentage has been a change in the percentage of payroll cost.

But, this time it was NOT payroll cost. The cost of payroll actually went up by almost .5 percentage points (from 32.49% to 32.96%). The reason for the increase in profitability was a big decline in overhead costs.

Benchmarking Study Page viii



As shown in Table 1, the Net Owner’s Compensation percentage is still down a lot from 1983, BUT it is higher than it was in 1993 and 2003. During this 30 year period, cost of sales has remained very constant at about 29% to 31%.

As mentioned above, payroll costs actually increased as a percentage of sales on these results and have been on a fairly steady increase for most of the past 30 years. I’ll discuss this in more detail a little later.

As for overhead cost, reductions in this expense category have been a pleasant surprise over the past few years. While payroll costs have increased by 8.7 percentage points since 1983, the cost of overhead has declined by 5.2 percentage points. This has allowed our industry to maintain at least a reasonable Net Owner’s Compensation level, even if not nearly as good as it was back in 1983.

TABLE 1

PROFIT AND LOSS COMPARISONS FOR VARIOUS YEARS

1983 1993 2003 2013 Regular Printing $254,800 75.8% $397,923 59.2% $617,926 61.1 $599,858 53.0%

Copying 51,700 15.4 178,666 26.6 198,364 19.6 296,299 26.2

Brokered Sales 27,600 8.2 62,328 9.3 134,471 13.3 188,424 16.6

Other 2,000 .6 32,658 4.9 60,103 6.0 47,672 4.2

TOTAL SALES $336,100 100.0% $671,575 100.0% $1,010,864 100.0% $1,132,253 100.0%

Cost of Sales 99,800 29.7 192,021 28.6 294,943 29.2 344,307 30.4

Payroll 81,600 24.3 195,224 29.1 328,986 32.5 373,183 33.0

Overhead 94,600 28.1 199,735 29.7 271,208 26.8 259,942 22.9

TOTAL COSTS $276,000 82.1% 586,980 87.4% 895,137 88.5% 977,432 86.3%

NET OWNER’S

COMPENSATION $60,100 17.9% $84,595 12.6% $115,727 11.5 % $154,822 13.7%

NOTE: Until the year 2001, “Regular Printing” included sales from all categories except “copying, brokered sales and other.” Since 2001, various sales categories have been broken out from regular printing. For this comparison, I’ve combined these breakout sales in order to compare to past years where the breakout is not available.

Net Profit Per Employee This is another good way to compare the profitability of different companies. It is calculated by taking Net Owner’s

Compensation and then deducting a fair value to cover the salary and fringes for the one working owner who is normally included in Net Owner’s Compensation. The formula we use is $14,000 base salary plus 4% of annual sales volume. That salary gets multiplied by 1.18 (adds 18%) to cover fringe benefits. For example, in a company with $1 million in sales, the salary would be $54,000 ($14,000 + 4% of sales). The total would be $63,720 ($54,000 x 1.18).

So, let’s look at how we calculated Net Profit Per Employee for “All Firms”. With annual sales of $1,132,253, the fair salary and fringes for an owner is estimated to be $69,962. Since Net Owner’s Compensation was $154,822, the company Net Profit was $84,860 (this is also referred to as Excess Earnings). The Key Ratio sheet (page 55) shows that there were a total of 9.12 employees, but that included the working owner. Since we deducted the pay for the working owner, we now have 8.12 employees who are to be used to calculate the Net Profit for Employee. Dividing $84,860 by 8.12 employees results in $10,451 Net Profit Per Employee, which is shown on the Key Financial Ratio page.

On page 67, a check of the profit leader category (top 25%) shows Net Profit Per Employee of $30,438 while the profit laggard category (bottom 25%) showed a Net Loss Per Employee of ($1,825). These results show that the leaders

Benchmarking Study Page ix



made $32,303 more per employee than the laggards. This spread between leaders and laggards is somewhat less than the $34,509 reported in 2011. While the spread between leaders and laggards varies from study to study, it remains a very large number in the $30,000 to $40,000 PER EMPLOYEE range.

Composite Of All CompaniesAverage 2013 sales for all companies were $1,132,253. This is down $69,805 or 5.8% from the $1,202,058 reported

for 2011 sales. By comparison, 2011’s sales of $1,202,058 were up 18.2% from 2009’s reported sales of $1,016,939.

Comment: As mentioned in the earlier recap, this 5.8% decrease in sales was primarily the result of a change in the mix of participants. Based on the data from the current sur-vey respondents, my best estimate is that these companies actually had a sales increase of about 5.4%.

Single vs. Multiple ShopsOf the 136 respondents who answered this question, 125 indicated that they were a single shop and 10 indicated they

were a multiple shop operation. The percentage of single shop operations was 93%, about the same that it has been for the last few studies. The average multiple shop operation had 2.1 shops and total gross sales of $1,729,735. This amounted to $823,683 per shop compared to $1,132,253 for single shop operations. Of the 10 multiple shop operations, 9 had two shops and 1 firm had 3 locations. The average net owner’s compensation for multiple shops was $172,145 or 9.95% vs. $153,117 or 14.06% for single shops.

Independents vs. Franchises?There were replies from 117 Independent firms and 19 Franchise owners. Sales volume for franchise shops averaged

$1,256,181 vs. $1,112,129 for independents. Net owner’s compensation for franchise shops was $164,795 or 13.1% vs. $153,202 or 13.8% for independents.

While the average franchise owner had lower cost of goods and lower payroll costs, totaling a reduction of about 1.4% of sales compared to independents, their total overhead cost (including franchise fees of 3.3%) was about 2.1% higher than independents. The net effect of these variations was that Franchise Firms ended up with Net Owner’s Compensation that was lower by .7% of sales. But, because annual sales volume was greater for the average Franchise owner, the dollars of Net Owner’s Compensation was higher even though the percentage of owner’s compensation was a little lower.

SummaryWhile these study results attempt to clearly show the financial health of our industry, the sheer volume of data can

sometimes be overwhelming. If you are not making the profits that you want to make, you may be wondering what you should concentrate on first in order to improve the situation.

Well, while there can be many areas of concern and they can vary from company to company, there are some common cost problem areas that show up most of the time and that is where I would start. Here are some of my thoughts regarding how you might work on improving profitability:

A. Sales Per Employee (SPE) – This would be the first area that I would look at. Not only is it critical to the control of payroll cost, but it is very easy to calculate and monitor. Take a look at the colored chart in the front of this report regarding SPE. It shows that there are several companies who are reporting significantly higher SPE than the average. This can do wonders for profitability.

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PAGES XI-XV OMITTED



B. Payroll Cost Percentage – This is by far the biggest cost category in our industry and it has the largest spread in cost percentage between leaders and laggards. There are two main ingredients in payroll cost percentage. The first and most important one is SPE. A low SPE will drive up the cost of payroll. The second is the rate of pay for the employees. This can also drive up the cost of payroll.

C. Cost of Goods & Overhead – While these costs do have to be monitored, survey results over many years have shown that these costs typically don’t vary greatly from company to company. Also, they tend to be items where the cost is established and then that cost is used for some period of time. This is quite different from payroll cost, which depends greatly on employee productivity.

D. Net Owner’s Compensation – If the above costs are managed well, there should be a good level of Net Owner’s Compensation as a reward for doing a good job.

When running my print shops, I tended to concentrate on 3 key numbers to know if I was doing well. Those numbers are: Sales Per Employee; Payroll Cost Percentage and Net Owner’s Compensation Percentage. If those 3 numbers were doing well, then I felt that I was in good shape.

So, by now you’ve looked at the results of this study. What do all these numbers mean and how can you use these results to improve your business? In response to the first question, I believe these numbers mean that we are in a mature industry. Consider the following:

• Annual sales volume has been relatively flat for the past 10 years. It has only grown by about 2.3% per year or about the rate of inflation.

• Net Owner’s Compensation for all companies stands at 13.7%, down from 17.9% in 1983. With little or no growth in sales volume, companies that are maintaining good profits are doing so by cutting costs. Some are gaining sales by acquiring competitors who are going out of business. I think that both of these actions are signs of a mature industry.

• The major culprit in this decline in owner’s compensation percentage since 1983 has been the increase in the cost of payroll as a percent of sales.

The following is a recap of payroll cost changes over the past 30 years.

Payroll as a Percentage of Sales

1983 1989 1997 2001 2007 2013

ALL COMPANIES 24.3% 28.0% 29.8% 31.4% 31.4% 33.0%

SINGLE SHOPS 23.1% 26.1% 28.8% 30.6% 30.7% 32.7%

MULTIPLE SHOPS 26.0% 32.0% 32.5% 35.8% 36.6% 34.8%

Comment: This payroll cost increase, as a percentage of sales, is a disturbing statistic and I believe it is cause for serious concern within our industry. While the increase had slowed somewhat in the early 2000s, it looks like it is starting to climb again. The 2013 rate of 33.0% is the highest ever recorded in the “all companies” category. It is just slightly higher than the 32.9% for 2009.

As shown above, payroll costs are 8.7 percentage points higher than 1983 (33.0% vs. 24.3%). During this 30-year period, Net Owner’s Compensation declined by about half that amount or 4.2 percentage points. This is because “over-head” actually declined by 5.2 percentage points while “cost of sales” was increasing by .7 percentage points during this time frame. Put in plain English, if our industry could have held payroll cost increases to about half of what actually has happened (held to 28.7% of sales) , our industry could have seen a small increase in Net Owner’s Compensation over the past 30 years.

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So, how can you use these results to improve your business? As I see it, results of studies such as this provide a stan-dard by which you can judge your performance. Your challenge is to analyze these results and determine what has to be done in order to improve your company.

In order to help you compare your company with the appropriate benchmarks, on page 83, you will find a 2014 Profitability Worksheet. In the first column, you should fill in your actual key ratios. In the second column, you should fill in your ratio goals based on information found in various parts of these study results. Mark down the page on which you found the appropriate benchmark information. This will help you as you work toward improving your company.

In addition to filling out the profitability worksheet, I’d like to suggest some other steps you can take to improve the profitability and success of your company:

1. Set up your Standard Chart of Accounts (on your financial statements) to match the format shown on these study results. This will allow you to compare your actual results with the industry findings for companies of dif-ferent types and with different levels of sales volume. This includes the breakdown of sales categories as well as all of the various cost categories. Even though these studies have been using virtually the same chart of account format for the last 20+ years, many companies still choose to set up their financial statements in a different format, which greatly hampers their ability to use these study results. One of the most common problem areas can be found in the methods used to record payroll costs. Many firms break down the cost of labor into several different line items, which makes it very difficult to come up with a dollar value for total payroll costs and then translate those dollars into a percentage of sales.

2. Make sure that your monthly financial statements include percentages for each line item. It is difficult, if not almost impossible, to make any sense out of a dollar value cost amount, without knowing how that amount relates to sales volume. For example, year-to-date payroll costs, of $120,000, might be $10,000 over your goal but still less than what you expected as a percentage of sales. This could easily happen if sales volume was up significantly in the period being reviewed. If you’re already using percentages on your financial statements, you know what I mean. But, hard as it may be to believe, I have run into many medium and large print shops that were not getting their financial statements provided with each item shown in dollars and as a percentage of sales.

3. Using the layouts as suggested in items #1 & 2, set up your statements so that they show the current month along with the corresponding month from last year. Also, show year-to-date comparisons as well.

4. Re-examining Payroll Costs – As mentioned previously, increases in payroll costs (as a percentage of sales) have been causing tremendous damage to the financial well-being of printing companies. If your payroll cost percentage is anywhere near the average in these results, you have a great opportunity to lower this percentage and increase your owner’s compensation in a substantial way. This is, by far, the biggest cost problem in our industry and therefore it offers the greatest opportunity for improvement.

But, before you tackle your payroll costs and achieve your savings, you’re going to need to determine the severity of the problem in your company. You will need to find out the answer to several questions:

A. What is your payroll cost, as a percentage of sales, and how does this relate to survey results for companies of your size and type?

B. How has your payroll cost percentage trended over the past few years? To answer this question, you’ll need to review your year-end financial statements for the past 4 or 5 years. Excluding one working owner, calculate payroll costs as a percentage of sales for each of these years. What has happened since 2008 or 2009? Has your payroll cost percentage remained constant or has it been increasing?

C. If it has been rising, then you probably have the common malady afflicting many print shop owners, which is that you are increasing employee pay much faster than their increase in productivity (as measured by Sales Per Employee).

Benchmarking Study Page xviii



D. How has your “Sales Per Employee” (SPE) calculation trended over the past 4 or 5 years? Is it growing a lot less than payroll costs? If you are typical, you have several employees who have been with you for many years. These employees tend to get “time-in-grade” pay raises each year. Simply put, these “time-in-grade” raises are at least a part of our industry payroll problem.

In conclusion, we are in a mature industry. And, just like in any mature industry, there will be many companies who will not figure out how to compete in this type of environment. Unfortunately, they will not make it. But, also like in other industries, there will be companies (you want to plan to be in this group) who will grow and flourish by controlling their costs and finding new profit centers.

Notes regarding calculations and rounding: Our original Excel data base produced calculations carried out to 3-4 decimal points and beyond. However, in our final data, we report numbers and currency carried out to no more than two decimal points. Consequently, if you attempt to manually calculate some of the key ratios reported in this study you may end up with a slightly different number than we are reporting, since our calculations used data carried out to multiple decimal points. As an example, you will note on page 55 of the Key Ratio Section that we report average Sales Per Em-ployee to be $124,120. If you attempt to take the average Gross Sales figure of $1,132,253 and divide it by the average number of employes of 9.12 you will get a slightly different number. That is due to the fact that the real average number of employees used in our calculation was in fact 9.1222.

Benchmarking Study Page xviii


SECTIONS 1-5

Excerpted

Unless noted otherwise, all extractions used to analyze and report data required that all participants be at least two years

old with annual sales between $250,000 and $5 million.

0

5

10

15

20

25

30

35

-4%- 2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 32% 34%

Num

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0%5%

10%15%20%25%30%35%

1983 1991 2001 2009 2011


WHERE THE MONEY COMES FROM

Cost of Goods29.1%

Payroll Costs31.4%


Owner’sComp.



Historical Analysis of Expenses (1983-2013)

FINANCIAL BENCHMARK STUDY AT A GLANCEDistribution of Owner’s Comp Among Survey Participants

Breakdown of 2013 Expenses & Owner’s Comp.

Breakdown of 2013 Sales

PROFIT DISTRIBUTION WITHIN INDUSTRY – The chart above represents a histogram depicting the distribution of companies by their level of “owner’s compensation.” Similar to previous studies, we had participants reporting owner’s compensation from -5% to companies reporting levels of 30% and above. This graph tends to dispute the often-quoted argument that studies such as this tend to be skewed towards more successful companies. In fact, the chart illustrates just the reverse in that companies from all profit levels appear to participate in research studies such as this.

GENERAL EXPENSES (1983-2013) – Although “payroll” (See red bars) costs continue to present the greatest obstacle to profits in our industry, some printers, especially in recent years, have been able to trim “overhead” expenses (blue bars) significantly and have thus brought about a slight turn-around in “owner’s compensation.” (See green bars) Note that “cost of sales” has remained at the 29-30% level now for more than 30 years.

WHERE IT COMES FROM AND WHERE IT GOES… The two pie-charts above depict, as a general rule, the major sources of income in our industry compared to the expenses required to support those sales. Printing Sales, although still representing a major source of income in our industry, continues to decline. In 2011 “Printing Sale” constituted 33%, as compared to the 28% reported for 2013. On the other hand, “Color Digital” continues to increase. In 2011 “Color Digital represented approximately 15% of sales, as opposed to the 17% reported for 2013.

Benchmarking Study Page 3


FINANCIAL BENCHMARK STUDY AT A GLANCE

2013 Income & Expense Analysis - Leaders vs. Laggards

Participants Achieving Various SPE Levels

SALES PER EMPLOYEE – The graph above is a histogram depicting the distribution of survey participants by their respective sales per employee. While the average industry SPE is now approximately $124,000, it is apparent that a significant percent of companies continue to struggle when it comes to this key “productivity” metric. Note that almost 29% of the participants reported an SPE between $130,000 and $160,000, while approximately 15% reported SPEs of $100,000 or less! Examine the Key Ratio Section of this report, specifically those pages reporting profitability quartiles, and you will note that there is an amazingly close correlation between profit-ability and sales per employee.

INDUSTRY LEADERS VS. LAGGARDS – The bar chart above illustrates the differences in key ratios between the top 25% of the industry versus the bottom 25% in terms of owner’s compensation. While “cost of goods” as a percent of sales remains quite similar among both the top and bottom quartiles, the significant differences in payroll and overhead expenses between these two quartiles accounts for the major differences in owner’s compensation levels being reached in the industry.

PARTICIPANTS RATE INCOME SOURCES – Survey participants were asked to rank seven different source of income in our industry (on a scale of 1-9) as to which ones represented the best opportunities for growth in the next 12-18 months. As you can see, “Signs and Large Format” along with “Color Digital” received the highest scores among our survey participants.

Rating of Industry Growth Opportunities

$60,000 $80,000 $95,000 $110,000 $130,000 $150,000 $170,000 $185,000 $200,000 $220,000 $250,000



GENERAL SUMMARY PAGETotal number of surveys submitted ....................................................................................................... 152Total number of qualified surveys ......................................................................................................... 144Total number of qualified surveys used in this report* .......................................................................... 136

Average age of participating firm ............................................................................................................ 31 Median age of participating firm ............................................................................................................. 31

Average annual 2013 sales of all participants .......................................................................... $1,132,253Median annual 2013 sales of all participants............................................................................... $760,297

Average owner’s Compensation for all qualified participants ......................................................... 13.67%Median owner’s Compensation for all qualified participants .......................................................... 10.22%

Average Cost of Goods (all firms) .................................................................................................. 30.41%Median Cost of Goods (all firms) .................................................................................................... 30.23%

Average Payroll, excluding owner (all firms) .................................................................................. 32.96%Median Payroll, excluding owner (all firms) .................................................................................... 36.53%

Average Overhead Expenses (all firms) ......................................................................................... 22.96%Median Overhead Expenses (all firms) .......................................................................................... 23.02%

Historical Analysis of Key Expense Items 1983 1991 2001 2009 2011 2013 Cost of Goods 29.7% 29.1% 30.2% 29.5% 31.2% 30.4% Payroll 24.3% 29.0% 31.4% 32.9% 32.5% 33.0% Overhead 28.1% 28.7% 27.1% 26.9% 24.8% 23.0% Net Owner’s Comp. 17.9% 13.2% 11.3% 10.7% 11.5% 13.6%

Sales History of Participants Average Sales Median Sales 2007 ................................................................... $1,477,868 ................................$950,077 2008 ................................................................... $1,343,460 ................................$940,532 2009 ................................................................... $1,175,435 ................................$813,294 2010 ................................................................... $1,187,053 ................................$803,500 2011 ................................................................... $1,202,058 ................................$849,013 2012 ................................................................... $1,099,612 ................................$764,770 2013 ................................................................... $1,132,253 ................................$760,297

Member of NPOA ............................................................................................................................. 60.3%Member of NAPL/NAQP ................................................................................................................... 33.8%Member of PIA .................................................................................................................................. 22.1%Craftsman Club................................................................................................................................... 0.7%Other Groups ...................................................................................................................................... 8.8%No association affiliations ................................................................................................................. 32.1%

Percent of participants who are “Independents” ............................................................................... 86.0%Percent of participants who are “Franchisees” ................................................................................. 14.0%

Member of a Peer Group .................................................................................................................. 30.0%No Peer Group Membership............................................................................................................. 70.0%

*Although the annual 2013 sales of participating firms ranged from a low of $83,000 to $8.3 million, we limited most of our ex-tractions to those companies with annual sales between $250,000 and $5,000,000. There were four (4) companies reporting annual sales less than $250,000 and four companies with sales in excess of $5,000,000. For statistical purposes, these eight companies were considered “outliers” and could have distorted the average industry sales being reported for this segment of the industry. Companies less than two years old were also excluded from our data. Excluded or not, every qualified participant received a complete copy of the final 2014-2015 NPOA Financial Benchmarking Study.




ALL FIRMS SUMMARY

ALL ALL ALLFIRMS INDEPENDENTS FRANCHISES

COUNT: 136 117 19

SALES $ % $ % $ %Pre-Press & DTP Services 92,492 8.17 91,784 8.25 96,854 7.71Printing Sales 320,769 28.33 324,261 29.16 299,264 23.82B&W Digital Copying Sales 106,239 9.38 101,825 9.16 133,421 10.62Color Digital Copying Sales 190,060 16.79 186,083 16.73 214,549 17.08Bindery & Finishing Sales 107,526 9.50 106,880 9.61 111,504 8.88Mailing Services Sales (Excl. Postage) 39,695 3.51 38,951 3.50 44,273 3.52Sign-Making/Large Format 39,378 3.48 41,423 3.72 26,781 2.13Brokered Sales 188,424 16.64 174,053 15.65 276,917 22.04Other Sales 47,672 4.21 46,868 4.21 52,618 4.19

TOTAL GROSS SALES 1,132,253 100.00 1,112,129 100.00 1,256,181 100.00

COST OF SALESPaper 131,394 11.60 132,515 11.92 124,486 9.91Copier Service Costs 42,253 3.73 41,382 3.72 47,618 3.79Other Materials 33,507 2.96 34,776 3.13 25,693 2.05Outside Services 26,317 2.32 27,076 2.43 21,643 1.72Outside Purchases 110,836 9.79 103,057 9.27 158,735 12.64

TOTAL COST OF SALES 344,307 30.41 338,807 30.46 378,175 30.11

PAYROLL COSTSPayroll 373,183 32.96 368,404 33.13 402,611 32.05

OVERHEAD EXPENSESAccounting and Legal Fees 6,211 0.55 6,319 0.57 5,550 0.44Advertising 11,832 1.05 11,419 1.03 14,379 1.14Advertising (Franchises Only) 576 0.05 - 0.00 4,122 0.33Amortization Expenses 3,318 0.29 2,753 0.25 6,795 0.54Auto Lease and/or Depreciation Payments 2,843 0.25 2,857 0.26 2,756 0.22Auto Operating Expenses 12,315 1.09 12,240 1.10 12,777 1.02Building Rent* 55,276 4.88 53,660 4.82 65,225 5.19Depreciation (equipment only) 33,919 3.00 32,940 2.96 39,947 3.18Franchise Fees 6,009 0.53 179 0.02 41,911 3.34Interest 10,855 0.96 11,624 1.05 6,115 0.49Lease & Rental Expenses - Copiers* 13,563 1.20 14,277 1.28 9,164 0.73Lease & Rental Expenses - Other Equip. 2,913 0.26 2,934 0.26 2,783 0.22Office Supplies 7,899 0.70 8,431 0.76 4,625 0.37Repairs and Maintenance 15,050 1.33 15,346 1.38 13,230 1.05Travel and Entertainment 6,502 0.57 6,031 0.54 9,403 0.75Utilities 18,638 1.65 18,088 1.63 22,024 1.75All Other Overhead 52,224 4.61 52,618 4.73 49,794 3.96

TOTAL OVERHEAD 259,942 22.96 251,715 22.63 310,599 24.73

TOTAL COSTS 977,432 86.33 958,926 86.22 1,091,385 86.88

NET OWNER'S COMPENSATION 154,822 13.67 153,202 13.78 164,795 13.12

PROFIT AND LOSS ANALYSIS

Published by NPOAand QP Consulting, Inc. -9-

Copyright © 2014 NPOAAll Rights Reserved Benchmarking Study Page 9


ALL INDEPENDENT FIRMS BY PROFITABILITY

0-24% 25-49% 50-74% 75-100%QUARTILE QUARTILE QUARTILE QUARTILE

COUNT: 29 28 29 31

SALES $ % $ % $ % $ %Pre-Press & DTP Services 113,139 10.50 143,977 8.75 57,834 7.07 56,424 6.01Printing Sales 342,416 31.79 592,566 36.02 167,211 20.45 211,857 22.56B&W Digital Copying Sales 89,935 8.35 104,788 6.37 106,488 13.02 105,908 11.28Color Digital Copying Sales 172,233 15.99 201,814 12.27 178,608 21.85 191,822 20.43Bindery & Finishing Sales 117,275 10.89 152,126 9.25 88,084 10.77 73,871 7.87Mailing Services Sales (Excl. Postage) 42,134 3.91 64,604 3.93 23,527 2.88 27,234 2.90Sign-Making/Large Format 32,669 3.03 54,584 3.32 21,140 2.59 56,701 6.04Brokered Sales 138,913 12.90 254,165 15.45 116,132 14.20 188,750 20.10Other Sales 28,487 2.64 76,392 4.64 58,587 7.17 26,435 2.82

TOTAL GROSS SALES 1,077,202 100.00 1,645,015 100.00 817,611 100.00 939,001 100.00

COST OF SALESPaper 137,071 12.72 213,787 13.00 91,542 11.20 93,177 9.92Copier Service Costs 41,840 3.88 40,381 2.45 42,379 5.18 40,926 4.36Other Materials 33,008 3.06 60,810 3.70 24,250 2.97 22,764 2.42Outside Services 20,254 1.88 67,263 4.09 14,174 1.73 9,229 0.98Outside Purchases 86,459 8.03 141,818 8.62 79,306 9.70 105,794 11.27

TOTAL COST OF SALES 318,632 29.58 524,058 31.86 251,651 30.78 271,890 28.96

PAYROLL COSTSPayroll 413,737 38.41 581,434 35.35 241,767 29.57 252,050 26.84

OVERHEAD EXPENSESAccounting and Legal Fees 7,615 0.71 7,967 0.48 4,839 0.59 5,002 0.53Advertising 7,606 0.71 18,842 1.15 9,422 1.15 10,150 1.08Advertising (Franchises Only) - 0.00 - 0.00 - 0.00 - 0.00Amortization Expenses 5,350 0.50 2,763 0.17 394 0.05 2,521 0.27Auto Lease and/or Depreciation Payments 3,508 0.33 2,630 0.16 2,801 0.34 2,504 0.27Auto Operating Expenses 9,324 0.87 19,267 1.17 10,866 1.33 9,905 1.05Building Rent* 53,592 4.98 69,050 4.20 47,504 5.81 45,582 4.85Depreciation (equipment only) 44,807 4.16 52,602 3.20 21,072 2.58 15,180 1.62Franchise Fees 257 0.02 2 0.00 - 0.00 433 0.05Interest 13,955 1.30 22,126 1.35 7,397 0.90 3,913 0.42Lease & Rental Expenses - Copiers* 13,602 1.26 19,716 1.20 13,264 1.62 10,944 1.17Lease & Rental Expenses - Other Equip. 2,691 0.25 6,749 0.41 1,092 0.13 1,437 0.15Office Supplies 9,183 0.85 9,175 0.56 6,602 0.81 8,767 0.93Repairs and Maintenance 18,110 1.68 25,057 1.52 9,636 1.18 9,328 0.99Travel and Entertainment 5,660 0.53 9,206 0.56 4,709 0.58 4,748 0.51Utilities 22,888 2.12 25,590 1.56 12,044 1.47 12,477 1.33All Other Overhead 74,879 6.95 63,387 3.85 33,533 4.10 39,920 4.25

TOTAL OVERHEAD 293,028 27.20 354,129 21.53 185,175 22.65 182,812 19.47

TOTAL COSTS 1,025,397 95.19 1,459,621 88.73 678,593 83.00 706,752 75.27

NET OWNER'S COMPENSATION 51,805 4.81 185,395 11.27 139,018 17.00 232,249 24.73

PROFIT LEADER ANALYSIS




ALL FIRMS SUMMARY


COUNT: 136 117 19

ASSETS $ % $ % $ %

Current AssetsCash 72,219 14.16 70,490 13.07 82,769 24.68Accounts Receivable 88,667 17.39 86,352 16.01 102,807 30.65Inventory 16,633 3.26 17,023 3.16 14,163 4.22Other Current Assets 24,106 4.73 26,155 4.85 12,656 3.77

TOTAL CURRENT ASSETS 201,625 39.55 200,020 37.10 212,394 63.32

Non-Current AssetsEquipment, Furniture, Vehicles, etc. 827,369 162.28 854,055 158.39 664,449 198.09(Less Depreciation) -618,796 -121.37 -623,937 -115.72 -587,134 -175.04Net Equipment 208,574 40.91 230,118 42.68 77,315 23.05Real Estate 51,864 10.17 60,286 11.18 0 0.00(Less Depreciation) -10,854 -2.13 -12,632 -2.34 0 0.00Net Real Estate 41,009 8.04 47,654 8.84 0 0.00Other Non-Current Assets 58,647 11.50 61,407 11.39 45,718 13.63

TOTAL NON-CURRENT ASSETS 308,230 60.45 339,179 62.90 123,033 36.68

TOTAL ASSETS 509,856 100.00 539,199 100.00 335,427 100.00

LIABILITIES & OWNER'S EQUITY

Current LiabilitiesAccounts Payable 42,404 15.96 41,038 14.78 50,599 25.49Notes Payable Within 1 Year 35,861 13.50 37,242 13.41 27,495 13.85Other Current Liabilities 24,106 9.08 26,155 9.42 12,656 6.38

TOTAL CURRENT LIABILITIES 102,371 38.54 104,435 37.60 90,749 45.72

Long-Term LiabilitiesNotes Payable (After 1 Year) 115,064 43.32 122,625 44.15 72,087 36.32Other Long-Term Liabilities 48,192 18.14 50,671 18.24 35,649 17.96

TOTAL LONG-TERM LIABILITIES 163,256 61.46 173,296 62.40 107,737 54.28

TOTAL LIABILITIES 265,627 52.10 277,731 51.51 198,486 59.17

TOTAL OWNER'S EQUITY 244,229 47.90 261,468 48.49 136,941 40.83

TOTAL LIABILITIES PLUS OWNER'S EQUITY 509,856 100.00 539,199 100.00 335,427 100.00

BALANCE SHEET ANALYSIS




SINGLE VS. MULTIPLE

ALL ALL ALLFIRMS SINGLE FIRMS MULTIPLE LOC.

COUNT: 136 126 10

ASSETS $ % $ % $ %

Current AssetsCash 72,219 14.16 71,377 14.20 80,776 12.82Accounts Receivable 88,667 17.39 85,042 16.92 142,426 22.60Inventory 16,633 3.26 15,682 3.12 29,313 4.65Other Current Assets 24,106 4.73 25,062 4.99 12,949 2.05

TOTAL CURRENT ASSETS 201,625 39.55 197,162 39.23 265,465 42.13

Non-Current AssetsEquipment, Furniture, Vehicles, etc. 827,369 162.28 810,073 161.20 1,122,282 178.09(Less Depreciation) -618,796 -121.37 -607,239 -120.83 -825,126 -130.94Net Equipment 208,574 40.91 202,834 40.36 297,157 47.16Real Estate 51,864 10.17 56,272 11.20 1,952 0.31(Less Depreciation) -10,854 -2.13 -11,817 -2.35 0 0.00Net Real Estate 41,009 8.04 44,454 8.85 1,952 0.31Other Non-Current Assets 58,647 11.50 58,092 11.56 65,586 10.41

TOTAL NON-CURRENT ASSETS 308,230 60.45 305,380 60.77 364,695 57.87

TOTAL ASSETS 509,856 100.00 502,542 100.00 630,160 100.00

LIABILITIES & OWNER'S EQUITY

Current LiabilitiesAccounts Payable 42,404 15.96 42,250 17.05 44,296 9.22Notes Payable Within 1 Year 35,861 13.50 36,369 14.68 29,601 6.16Other Current Liabilities 24,106 9.08 25,062 10.12 12,949 2.70

TOTAL CURRENT LIABILITIES 102,371 38.54 103,681 41.85 86,847 18.08

Long-Term LiabilitiesNotes Payable (After 1 Year) 115,064 43.32 103,744 41.87 263,483 54.84Other Long-Term Liabilities 48,192 18.14 40,345 16.28 130,150 27.09

TOTAL LONG-TERM LIABILITIES 163,256 61.46 144,089 58.15 393,633 81.92

TOTAL LIABILITIES 265,627 52.10 247,770 49.30 480,480 76.25

TOTAL OWNER'S EQUITY 244,229 47.90 254,772 50.70 149,680 23.75

TOTAL LIABILITIES PLUS OWNER'S EQUITY 509,856 100.00 502,542 100.00 630,160 100.00

BALANCE SHEET ANALYSIS




ALL FIRMS SUMMARY


136 117 19PROFITABILITY & FINANCIAL RATIOSGross Sales 1,132,253$ 1,112,129$ 1,256,181$ Cost of Sales 30.41% 30.46% 30.11%Payroll Expenses (excluding one owner) 32.96% 33.13% 32.05%Overhead Expenses 22.96% 22.63% 24.73%Owner Compensation 13.67% 13.78% 13.12%Excess Earnings 84,859$ 84,190$ 88,983$ Profits Per Employee 10,451$ 10,526$ 10,022$ Owner Discretionary Income 202,913$ 200,519$ 217,652$ Aver. Healthcare Costs Per Employee (excl. owner) 3,797$ 3,852$ 3,500$ Balance Sheet - Net gain/loss from asset sale (80,635)$ (94,734)$ (254)$

CASH FLOW RATIOSCurrent Ratio 1.97 1.92 2.34Quick Ratio (Acid Test Ratio) 1.81 1.75 2.18Inventory Turnover (times/year) 9.91 9.83 10.60Average Accounts Receivable 88,667$ 86,352$ 102,807$ Average A/R Collection Days 35 35 35Debt toTotal Assets 0.52 0.52 0.59Return on Net Assets 34.8% 32.2% 65.0%

PRODUCTIVITY RATIOSAverage # of Employees (incl. owner) 9.12 9.00 9.88Sales Per Employee 124,120$ 123,594$ 127,157$ Average # of Sales Reps 0.8 0.7 1.3Average Total Sales Generated by All Sales Reps. 867,781$ 936,630$ 661,233$

Sales Per FT Sales Rep (if applicable)* 1,140,272$ 1,382,785$ 518,080$ Sales Per Square Foot 166$ 163$ 182$ Percent Growth in Sales 2009 to 2010 0.77% -0.22% 6.36%Percent Growth in Sales 2010 to 2011 0.02% -0.19% 1.19%Percent Growth in Sales 2011 to 2012 2.34% 2.85% -0.31%Percent Growth in Sales 2012 to 2013 2.97% 3.01% 2.72%Projected Sales Incr./Decr. 2013 to 2014 4.37% 4.41% 4.20%

*If sales reps. equal less than .5, entry for sales Per FT Sales Rep = NA

OPERATING RATIO ANALYSIS - KEY RATIOS

RETURN ON NET ASSETS (RONA) - Represents the ratio of total assets (minus total liabilities) to net income. This is traditionally expressed as a percent. This is typically an indication of how well a company is managing its assets. While the average return on net assets (for all firms) is 34.8%, this ratio can vary dramatically from one firm to the next.

There are several reasons for these dramatic variations. One of these is little or no profitability, which will result in a low or negative return on net assets. On the positive side, a company making good to excellent earnings, with low net assets, will show a high RONA.




SINGLE VS. MULTIPLE

ALL ALL ALLFIRMS SINGLE FIRMS MULTIPLE LOC.

136 126 10PROFITABILITY & FINANCIAL RATIOSGross Sales 1,132,253$ 1,088,737$ 1,729,735$ Cost of Sales 30.41% 30.36% 31.09%Payroll Expenses (excluding one owner) 32.96% 32.73% 34.80%Overhead Expenses 22.96% 22.84% 24.15%Owner Compensation 13.67% 14.06% 9.95%Excess Earnings 84,859$ 85,208$ 73,981$ Profits Per Employee 10,448$ 11,134$ 5,288$ Owner Discretionary Income 202,913$ 198,030$ 264,769$ Average Healthcare Costs Per Employee (excl. owner) 3,797$ 3,962$ 2,661$ Balance Sheet - Net gain/loss from asset sale (80,635)$ (66,289)$ (244,328)$

CASH FLOW RATIOSCurrent Ratio 1.97 1.90 3.06Quick Ratio (Acid Test Ratio) 1.81 1.75 2.72Inventory Turnover (times/year) 9.91 10.16 8.43Accounts Receivable 88,667$ 85,042$ 142,426$ Average A/R Collection Days 35 35 37Debt toTotal Assets 0.52 0.49 0.76Return on Net Assets 34.8% 33.4% 49.4%

PRODUCTIVITY RATIOSAverage # of Employees 9.12 8.65 14.99Sales Per Employee 124,120$ 125,825$ 115,393$ Average # of Sales Reps 0.8 0.7 1.7Average Total Sales Generated by All Sales Reps. 867,781$ 799,192$ 1,512,513$

Sales Per Sales Rep (if applicable)* 1,140,272$ 1,148,265$ 916,674$ Sales Per Square Foot 166$ 166$ 167$ Percent Growth in Sales 2009 to 2010 0.77% 0.09% 6.99%Percent Growth in Sales 2010 to 2011 0.02% -0.56% 4.52%Percent Growth in Sales 2011 to 2012 2.34% 2.52% 1.30%Percent Growth in Sales 2012 to 2013 2.97% 2.97% 3.10%Projected Sales Incr./Decr. 2013 to 2014 4.37% 3.76% 8.93%

*If sales reps. equal less than .5, entry for sales Per FT Sales Rep = NA

OPERATING RATIO ANALYSIS - KEY RATIOS

RETURN ON NET ASSETS (RONA) - Represents the ratio of total assets (minus total liabilities) to net income. This is traditionally expressed as a percent. This is typically an indication of how well a company is managing its assets. While the average return on net assets (for all firms) is 34.8%, this ratio can vary dramatically from one firm to the next.

There are several reasons for these dramatic variations. One of these is little or no profitability, which will result in a low or negative return on net assets. On the positive side, a company making good to excellent earnings, with low net assets, will show a high RONA.




2014 PROFITABILITY WORKSHEET

A GUIDE FOR ACHIEVING HIGHER PROFITS IN 2014-2015The following chart should be copied and used as your master Profitability Worksheet. It should be completed and/or re-vised only after thoroughly reading the various pages and reports in this Study. In order to establish your “Ratio Goals,” we strongly suggest that you use the appropriate ratios listed under pertinent “Profit Leader” sections. For easy reference, we also recommend that you indicate the page in this report from which you have extracted these “Ratio Goals.” Then, and only then, use your year-end 2013 data to calculate your own current ratios. Once this is accomplished, use a yellow highlighter, if necessary, and then in the space at the bottom prioritize those ratios that are most in need of improvement and indicate those steps you intend to take in the next three to twelve months to improve them.

My Company’sCategory Current Key Ratios My Ratio Goals Ref. page

Sales Per Employee $________________ $_______________ (page______)

Owner’s Compensation $________________ $_______________ (page______)

Cost of Goods ________% ________% (page______) Paper ________% ________% (page______) Copier Service Costs ________% ________% (page______) Other Materials ________% ________% (page______) Outside Services ________% ________% (page______) Outside Purchases ________% ________% (page______)

Payroll ________% ________% (page______)

Overhead ________% ________% (page______)

Sales Per Sq. Foot $________________ $_______________ (page______)Profit Per Employee* $________________ $_______________

*(See Executive Summary and page XX for an explanation of this and the following four ratios)

Inventory Turnover ___________ Times ___________ Times

Current Ratio __________ __________

Debt to Total Assets ________% ________%

Return on Assets ________% ________%

NOTES, OBJECTIVES & GOALS 2014-2015: ___________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________

____________________________________________________________________________________




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