CETA Edge

Benchmarking

Reflections from the 2022 Committee Chairman

By Diane M. Calabrese / Published March 2022

Not yet taking advantage of the benchmarking program offered by the Cleaning Equipment Trade Association (CETA)? (Make that offered as a benefit of membership at no additional cost.)

     Well, R. Calvin Rasmussen, the new chairman of the CETA committee on benchmarking, wants to be sure current and prospective members of the association understand the utility of the diagnostic tool for a business. Rasmussen is president and CEO of Royce Industries L.C. in West Jordan, UT.

     What goals has Rasmussen set? “To grow the level of participation in this valuable tool,” he says, is at the top of the list.

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     Rasmussen explains he will work to be sure members realize the benefit of benchmarking. By “exploiting this tool in their individual companies,” he says, CETA members may be able to make big gains and experience a “potential explosion of growth.”

     Again, participation in the annual benchmarking program is open to members at no cost. Participants receive an individualized performance analysis report (PAR).

     The PAR shows a company how its structure compares to others. Can the company improve, for instance, by reducing cost tied to each sale—by using mapping to minimize travel time or committing to make an additional sale per trip?

     “To me personally, receiving the annual PAR is like waking up on Christmas morning,” says Rasmussen. “I cannot wait to see what the report has in store for our company.”

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     The PAR does not present numbers, percentages, ratios, and more as standalones. “It also educates you, the participant, on how to understand the data points,” explains Rasmussen. “It helps you understand where you rank among your peers that have operational sizes similar to your company…”

     As years of participation in benchmarking accrue, a company gains an even more robust understanding of its health and its opportunities for shoring up every part of the business. Standing against peers and quantitative movement (growth or decline) from year to year emerge clearly.

     The clarity provided illuminates a path forward, explains Rasmussen. “It helps your company pivot and adjust” as needed to maintain position and grow.

     “Participation in benchmarking is easy,” says Rasmussen. Moreover, the financial data submitted by participants is fully protected. Anonymity of participants is fundamental to the mechanics of the program, which is administered by a third party with no member of CETA involved.

     In short, the PAR prompts participants to ask tough questions. Can more be done to control expenses? How much more can we control expenses without jeopardizing sales opportunities? The PAR also proves a useful tool when meeting with lenders or others providing credit to a business. 

     Rasmussen’s company has participated in the CETA benchmarking program from its inception. “We use benchmarking and its subsequent PAR as part of our annual budgeting, planning, and strategy.”

     Among the “golden nuggets” in the PAR, says Rasmussen, is sales per variable information, such as per employee, per customer, per vehicle. “Since we have been participating in CETA benchmarking so long, just this single datapoint has helped us ‘go deep’ with each of our customers.”

     And what does Rasmussen mean by going deep—an example? “Instead of simply selling a customer a pressure washer, information from the PAR has helped us focus on selling additional items, such as detergents, automatic parts washers, accessories, parts, and preventive maintenance.”

     The PAR not only indicates where operational improvements can be made, but it also affirms strength. While Rasmussen’s company learned it spends too much on liability and casualty insurance and too little on advertising and promoting itself, it also learned that its employees are well paid. 

     It’s possible to look at the PAR as a profile of fitness. It’s analogous to a personal health profile that provides guidance for how to trim down or bulk up or generally get into top condition.

     A business has assets of many kinds—its product and/or service, inventory, facilities, land, vehicles, employees, etc. Each one of the assets has a preservation cost tied to it.

     Employees must be paid. Facilities must be kept in good working condition. There’s an entire area of finance focused on just what a company must do to both retain and maintain assets and realize a profit. 

     The return on asset figure (ROA) is sometimes used as a snapshot of the financial health of a company. The ROA for a company in good shape is lower than many new entrants to business might think. Obviously, zero or less is untenable. But 10 percent is good. (A business has many, many expenses tied to its assets and existence.)

     For distributors, being able to tease out factors such as the expenses required to produce sales, inventory required to support sales, and investment in AR [accounts receivable] needed to support sales helps generate ideas about how to get to or otherwise improve a 10 percent ROA. 

     What PAR makes clear to new business owners especially is that sales volume alone does not mean much. Somewhere in the gross margin there must be a profit, a sustaining profit.

     So important is an understanding of financials to distributors that three manufacturers—Alkota Cleaning Systems Inc., Kärcher, and Mi-T-M Corporation—sponsor the CETA benchmarking program. Through their sponsorship, they make the program free to members. Profit Planning Group in Boulder, CO, operates the confidential benchmarking program for CETA. 

     Manufacturers have a vested interest in the well-being of their distributors. Moreover, the better distributors can forecast their needs precisely, the tighter the controls on expenditures for both manufacturer and distributor. As the two most recent years have brought challenges to supply chains, accuracy in forecasting and accounting—to benefit individual companies, the industry, and society—has become more important than ever. 

     The enthusiasm Rasmussen has for the benchmarking program is palpable. “As you can gather, I love this program,” he says. 

     The way that the results from the PAR can be tailored to a format for a particular company makes it all the more useful, explains Rasmussen. Along with the PAR, a participating company receives a prescriptive action plan.

     The prescriptive action plan, customized for each participating business, is a summary of the five places where the company should focus attention and suggests the three to take on first. (Rasmussen says his company tackles all five recommendations.) 

     Focusing on the recommendations brings results. “We have experienced year-over-year growth every year since participating in the CETA program,” says Rasmussen.

     As individual participants in benchmarking get stronger, so does the industry. “As individual CETA member companies grow, our industry grows,” says Rasmussen. “As our industry grows, every one of our CETA member companies are introduced to new and improved products to offer, which continues to strengthen our individual companies’ foundations.”

     Association members, who are competitors as well as colleagues, getting together (anonymously) to consolidate and evaluate information through a third party adds to a “win, win, win,” says Rasmussen. During his tenure as chairman of the benchmarking committee, he hopes to do one thing above all others.

     Rasmussen says he will strive “to express to CETA membership—especially distributor members—that the value received from participating in annual benchmarking, and its subsequent PAR, alone is worth the cost of annual CETA membership.”

     Today is a good day to join CETA. Send an email to info@ceta.org to get started.