Exactly one year ago, I wrote about the results of the National Ready Mixed Concrete Association Industry Data Survey, and took a close look at how the producers who rank in the top 25% of our industry compared to their peers. I compared Leaders, or the top quartile, to the performers in the 50th percentile, or the Typical Producers.
This year, the survey captured the bottom 25% of the financial performers, and our firm conducted the first-ever analysis of how the top producers' performances compare to those at the bottom of the ladder. The results are stunning and reflect how far apart the top is from the bottom in this industry.
First, the Leaders are blessed with the single most important ingredient to their success: selling price. This year, the Leaders actually grew the margin of selling price, expanding their profit advantage over the Typical Producer as a percentage over last year. In contrast, the lowest quartile suffered some of the lowest selling prices in the country, which reverberates all the way down through their income statements.
Specifically, the Typical Producer saw a jump of more than $11 per cubic yard in average selling price, from $69.44 to $80.98. This is not unexpected, given the pricing power the industry has had as a result of cement price increases over the last year.
But the Leaders enjoyed a selling price that was a significant $4.20 per cubic yard more than the Typical Producer, as compared to the lowest quartile, which suffered a selling price that is $8.67 less than the Typical Producer. Comparing the top to the bottom, the difference is a whopping $12.87 per yard.
That $12.87 goes a long way. It can mask a multitude of operational shortcomings, such as higher selling, general, and administrative costs the Leaders are saddled with.
Here are the other major differences between the top and bottom performers that drive these differences:
Regardless of where you stand in relation to your peers, or in what segment of the concrete industry you participate, the message is clear: The key to success is managing the selling price.
As demand softens, managers must better-manage the selling price. For example, is your current price level temporary, or is it culturally ingrained? Only when you know the answer can you decide how to better compete.
— Pierre Villere is president and managing partner of Allen-Villere Partners. Contact him firstname.lastname@example.org.