I once complained to a rep that his product line didn’t have as much profit percentage as another brand we were considering carrying. He heard me out, quietly sitting through my, “See this?! I’m making 400 percent on this product. See this?! That’s 500 percent!” rant, and then he asked how much we were actually going to sell the other product for.
After I told him the price — which was significantly less than the brand he repped — he asked me a question, “What do you take to the bank — profit dollars or profit percentage?”
It was a simple but very astute observation, and gave me a great perspective.
On paper, buying something for $1 and selling it for $6 is a massive markup from a percentage standpoint; but it’s only netting you five actual dollars to take to the bank. Selling a product that you buy for $20 and sell for $30 might not be as glamorous on paper, but it is double the amount of money in your bank account. Scale that up to items selling for hundreds or thousands of dollars, and the profit dollar disparity becomes even greater.
At the end of the day, it’s the profit dollars we take to the bank and that keep us in business.
And this led me to a bit of an epiphany a few weeks ago while working on a pretty large, multi-day prewire that included wiring for loads of lighting, shading, distributed audio, and networking.
I used to think prewires were one of the best and most profitable things our company did. Filled with nothing but thousands of feet of wire and hours/days of labor — our two most profitable items from a percentage standpoint — we aggressively sought out doing prewires, the bigger the better!
And on this recent project, after three long 8-hour days with three guys on the job where we pulled nearly two miles of cabling, we had a prewire invoice close to $9000.
And from a percentage standpoint, killing it.
But from a dollars’ standpoint? Meh.
This prewire ate up — and exhausted — my crew for the majority of the week and was about on profit dollar parity with installing a modest surround system consisting of a large flat panel display, speakers, and control system. Which would take two-thirds the manpower, be done in a fraction of the time, and maybe even leave time to do something else the same day.
For this project, the homeowner was a previous customer that knew our work product, and didn’t want anyone else doing the work. The builder also either wanted all-in or all-out on the low-voltage. So, ultimately, there would have been no six-figure next step of selling the lighting, shading, speakers, networking, etc. if we hadn’t done all the wiring work.
But this job of opened my eyes that, for our company, the prewire is really more of a necessary evil than a great source of revenue.
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Now, don’t get me wrong; there are still loads of good reasons for your company to be prewiring all of your projects. First off, quite simply, that might be the only way you get the job, or that completing the job is even possible.
Second, you just can’t beat having that end-to-end control on your projects. With your crew handling the prewire and pulling your preferred wire, you’ll roll into the trim-out/install knowing that everything has been done to your standards and specifications, things (likely) won’t have screws or nails run through them because they did it correctly, and every wire will be in every location you need. This also eliminates any finger-pointing after the fact. We all know no homeowner wants to hear, “Well, I’m sorry that X isn’t working; we didn’t pull the wire and what is here won’t work because XXX…” when it’s time to light the system up.
Finally, if you’re a larger company, you might have an entire division of “junior” techs that do nothing but handle prewires, and this can be a great way of feeding the work pipeline while also training up younger technicians.
But how many times have you been involved in a major prewire, hoping for that sweet-sweet final install project, and then something happened, and the job fell through? Maybe you get a chance to resurrect it with the new owners, or maybe you don’t. But all that “upfront” investment you put into the prewire, ends up being a gamble that didn’t pay off.
I’m not saying we’ll be turning away prewires going forward. And it isn’t like we lose money on the wiring, or that a prewire is a lost leader. It’s just that I have a new perspective on their importance in the overall scheme of things.