The Fallacy of Business Cycles and Other AV Industry Insights
There was a time when AV companies could peg their business fortunes to the ebbs and flows of their primary markets. Client type A would buy in the fall, client type B in the spring. Federal government clients, for example, tend to cram in a lot of tech purchasing right before their fiscal year ends, September 30.
But with more AV firms entering more markets, that doesn’t appear to be the case anymore. At least that’s what AV companies’ actual financial data seems to indicate.
“The AV industry isn’t so cyclical anymore,” Frank Coker, president and CEO of CoreConnex, told me recently. “Everything you thought was predictable turns out not to be.”
How does Frank know this? Let’s step back a moment.
CoreConnex developed the Corelytics Financial Dashboard, a web-based software program that helps analyze companies’ finances so they can see at a mouse click how they’re performing in relation to their business goals. It was named “App of the Year” by Intuit, the company that makes many of the leading financial software programs. In the past year, CoreConnex and InfoComm have partnered to offer the Corelytics Financial Dashboard to InfoComm members at a significant discount–basically half off what other companies pay to use the system. When AV firms sign up, they create an automated link between the Dashboard and their accounting software (Coker says up to 60 percent of users have QuickBooks, but the Dashboard works with any accounting software). Their data gets uploaded into the Dashboard and they can begin to use its extensive tools.
For AV companies, the Dashboard does several things. It helps them see business performance trends in graphical form. Unlike their accounting software, which shows them where they’ve been, the Corelytics Dashboard is able to analyze where they’re going. The Dashboard helps companies monitor their performance against their goals and it can forecast what Coker calls “collisions,” which are basically red flags that something is wrong. “Say revenue is growing at 8 percent and expenses are growing at 12 percent,” Coker explains. “At some point those lines are going to cross.” The Dashboard helps companies spot those issues in advance so they can adjust.
Plus, “Most companies don’t have a good way to share financial data with management,” says Coker. The Dashboard offers a way.
But here is what piques my interest: All the financial data that goes into the Corelytics Dashboard system offers a real-time picture of industry health — not just company health. For example, say you’re tracking your company’s cash flow. In addition to a graphical representation of your financial data, you can see aggregate data for all other AV companies that use the Dashboard system. In other words, you can compare your performance to the industry’s at large. The aggregate data remains anonymous — you can never identify data with other companies, just as they can never discern your specific data. But the picture that the collective data creates can be telling because it’s real and real-time. It’s one thing to ask companies about their business performance (and incredibly useful, as InfoComm’s Economic Snapshot Surveys demonstrate); it’s another thing to be able to graph their performance using real data.
InfoComm and the folks at CoreConnex are able to provide those in-depth looks into the AV industry’s performance. Recently, they published some highlights from Q4 2012, based on actual data from roughly 50 AV companies that are using the Corelytics Dashboard. As the latest InfoComm Economic Snapshot indicates, business weakened at the end of last year, likely as a result of uncertainty over the presidential election and fiscal cliff negotiations. According to the Dashboard data, sales were down almost 10 percent for the six months ending December 31, 2012. But compare that to the two-year rolling average of 7.2 percent sales growth that companies have reported.
In addition, it appears payroll is climbing faster than sales. On the one hand, that may indicate a positive outlook from AV company management. But as Coker puts it succinctly, “That’s not sustainable.” The Dashboard can pinpoint that “collision point” before a company gets there.
As you can see from the real-world data — what they’re calling the InfoComm AV Financial Index — cash balances have been trending downward lately, a potentially ominous insight. Gross margins remain healthy, a sign, Coker says, that AV companies are operating efficiently overall in the face of economic uncertainty. Though he believes gross margins may be overinflated, with companies leaving out labor costs and treating payroll as overhead.
Ultimately, this kind of insight could prove invaluable to the companies that take advantage of it. And the more AV companies that take part in the Corelytics Dashboard program, the more useful it becomes — for everybody. Not to sound like an ad, but maybe you should think of signing up today.