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The NFDA 2015 Profit Report financial benchmarking study presents a detailed but straightforward analysis of financial and operating characteristics of 37 participating fastener distribution firms. Results are presented in tables and graphs designed to provide a comprehensive guide for analyzing profitability.
The report also provides some key insights into exactly how the high-profit firm generates those better profit numbers. The report provides clear evidence as to how small differences in a few areas translate directly into higher levels of profitability.
In 2014 the typical firm generated sales of $13,148,000. On that sales base, it produced a pre-tax profit of $670,548, which equates to a profit margin of 5.1% of sales. Stated somewhat differently, every $1.00 of sales resulted in 5.1 cents of profit. The results can best be described as adequate. Quite simply, they are not as strong as they should be.
In contrast to the typical firm, the high-profit firm generated a profit margin of 13.0%. This means that even if the high-profit firm had produced the same sales volume as the typical firm, it would have generated more profit for reinvestment in the firm. It is a reinvestment factor that tends to multiply over time.
A number of factors led to the differences in overall results between the typical firm and the high-profit firm. In most instances these differences can be illustrated by examining what are commonly called the critical profit variables (CPVs).
• Sales per Employee
• Gross Margin Percentage
• Operating Expense Percentage
• Inventory Turnover (times)
• Average Collection Period (days)
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