There are many anecdotal stories of how Covid affected the flooring business. At Flooring by the Numbers we like objectivity. So we looked to the numbers to tell us.
We have aggregated 19 flooring company financials and pipeline data to decipher the COVID dynamics.
We segmented the data into 3 buckets:
- Pre-Covid: 2019 Data
- Covid pandemic: 2020 Data
- Post Covid: 2021 data through October
Consolidated Flooring Inc displayed the following trends:
Revenues from installed work declined by 5.5% in 2020. This was not as big a decline as we first anticipated. Further analysis showed that backlogs in January 2020 were at an all-time high. Schedules were delayed but most of the companies in our analysis were able to keep their installation crew intact and gainfully employed.
2021 has been relatively flat but there are encouraging signs of recovery which reversed the 5.5% revenue decline in 2020 to a modest 2% in 2021 year to date.
Margins significantly declined for 25.5% to 23.2% in 2020 and are still trending south in 2021 to 22.5%
Our theory based on observations, is this decline is due to different customer acquisition behaviors.
Traditional customers had less business so to replace the existing account business flooring companies had to hunt for new work and in new areas. Those with a disciplined sales process were better able to hunt for new relationships. Some got into areas where they had less technical experience and margins suffered somewhat.
(This was discussed in more detail in our earlier blog: Commercial Flooring Headwinds in 2021)
Companies did a magnificent job staying in positive profit territory during Covid, but 2021 has seen the average company lose money in the current period.
When you peel the onion slightly and view the leading indicators inherent in the pipeline some significant variations have been identified.
Backlog shrank 15% during the Covid period. Some recovery has happened post Covid period but has not been restored to pre-Covid levels.
Part of the post Covid backlog improvement is due to schedule delays from 2020 pushing work out of 2020 into 2012. It is further I compounded by material delays. In our opinion backlog would still be down if the normal schedule behavior were in place. A good portion of the backlog growth is due to lower installed revenues.
The backlog mix has changed
Our pre-Covid benchmark found the backlog would turn every 5.3 months.
Post Covid the backlog turn is 9.6 months.
The slower moving backlog in part is due to quick turn work declining significantly, by as much as 50%.
Conversion rates fell by more than half during the 2020. The bounce back has been rapid to 19% in 2021. The work won however is longer term work.
We have identified a new critical performance indicator. We call this the turbo rate. It measures the additional written work achieved outside of pure bid work.
It is driven by change orders and what we call privately negotiated. Our benchmark data tells us change order should be around 15% of the original contract. The turbo rate took a terrible beating during 2020.
The last 2 measures, the amount bid and written in the same year, and amount bid the prior year and written in the current year showed some interesting trends.
Both measures were understandably down in 2020. What is interesting is that a significant rebound happened in the old bids as they came back to life.
The moral of the story as we know is that things have changed. We must be more diligent about knowing our pipeline dynamics to understand the future ahead of us.
To take advantage of best practices of sales, pipeline management, conversions, and your overall numbers we recommend that you join us in the Flooring Academy. It is designed to provide you with the tools and competencies you need to scale your business and to withstand the next unpredictable challenge. Here with like-minded people, we will:
LEARN – Develop skills based on best practice
COLLABORATE – Share experience with other Flooring company participants
EXECUTE – Guided disciplines to get things done
IMPROVE – Profit cash and returns and significantly upskill your people
Learn more at https://flooringbythenumbers.com/academy/
Our first year will focus on the 4 core competencies of a commercial floor organization:
- Specialized lead creation
- Pipeline management – 1 and 2 are all about the future
- Work in Progress execution excellence – all about the current
- Know your numbers – all about getting better.
We look forward to you joining us
PS Check out our podcast: Flooring by the Numbers Podcast