Is Your Pricing Keeping Pace With Inflation? The Gross Margin Metric Every IT Firm Needs

HI! HERE ARE NUGGETS FROM THE LAST MONTH THAT COULD ADD TO YOUR BUSINESS:

Gross Margin/Loaded Compensation — Are you confident that your pricing is keeping pace with inflation? To check, use your company's total gross margin dollars divided by total loaded compensation (less owner's comp) for 2019, 2022, 2023, and YTD 2024. This is the KEY metric to monitor to see if your pricing strategy and efficiency focuses are keeping up with inflation as underlying costs and wage pressures are causing firms to 'grow broke.' Send me the numbers you come up with so we can discuss the trend together.

SHORT TERM OR LONG TERM?

Is your company giving priority to the long-term health of your organization? According to a McKinsey and Co article, 'Few companies manage people in ways that effectively assess their contributions to company health or reward them for improving it.' In my day-to-day work with clients, I consistently see those companies whose culture encourages a longer-term perspective outgrow, outmaneuver, and outlast those companies that focus purely on short-term results.

My takeaways from this article: 1. Culture drives results, and your senior executive team drives culture, so any changes need to start there. 2. Long-term success is based on consistently applied values — hire and fire based on your organization's core values, and systematically promote examples of team members living specific core values. 3. Measure Simply — decide on at most a handful of performance metrics and make it easy to understand. Complexity is the enemy of effectiveness here.

AND ON A PERSONAL NOTE

My daughter Quinn and her fiancé bought a house in Louisville, KY and I got to spend over a week with them in late September. Ostensibly I was there to help with home improvement projects (we did hang a new light), though we spent most of our free time enjoying the local area, playing board games, and being entertained by their dog and 3 cats. We also had dinner at a local wild game restaurant which I cannot recommend.

If any of this resonates, feel free to reach out.