Service Leadership
Total Profit Solutions for IT Companies®
Service Leadership Index®
- Product GM% - BIC Profit SPs: Q2-11 25.3% Q3-11 26.6% Q4-11 27.2% Q1-12 26.9%
- Product GM% - Median Profitability SPs: Q2-11 20.5% Q3-11 19.2% Q4-11 19.7% Q1-12 22.3%
- Product GM% - Bottom 1/4 Profitability SPs: Q2-11 20.5% Q3-11 18.5% Q4-11 14.8% Q1-12 18.8%
- Services GM% - BIC Profitability SPs: Q2-11 54.9% Q3-11 52.2% Q4-11 52.8% Q1-12 53.7%
- Services GM% - Median Profitability SPs: Q2-11 50.1% Q3-11 48.1% Q4-11 46.4% Q1-12 46.8%
- Services GM% - Bottom 1/4 Profitability SPs: Q2-11 41.0% Q3-11 42.9% Q4-11 38.8% Q1-12 39.5%
- SG&A% - BIC Profitability SPs: Q2-11 26.2% Q3-11 26.1% Q4-11 27.6% Q1-12 27.8%
- SG&A% - Median Profitability SPs: Q2-11 31.9% Q3-11 30.3% Q4-11 29.8% Q1-12 30.0%
- SG&A% - Bottom 1/4 Profitability SPs: Q2-11 34.6% Q3-11 36.9% Q4-11 35.4% Q1-12 33.2%
- EBITDA% - BIC Profitability SPs: Q2-11 19.2% Q3-11 17.8% Q4-11 17.7% Q1-12 18.3%
- EBITDA% - Median Profitability SPs: Q2-11 7.3% Q3-11 6.8% Q4-11 5.9% Q1-12 7.5%
- EBITDA% - Bottom 1/4 Profitability SPs: Q2-11 −1.1% Q3-11 −2.7% Q4-11 −5.6% Q1-12 −1.0%
Quarterly Solution Provider Performance
Why a Solution Provider Normalized Chart of Accounts?
Since we initially defined the Predominant Business Model categories based on the differing management techniques needed to optimize each line of business, aligning the Chart of Accounts, and hence all the financial reporting in the company, to these, makes perfect sense.
While we are doing aligning revenue with the Predominant Business Model categories, it would be just as well to align Cost of Goods Sold (COGS) and indeed to propose a complete, standard Chart of Accounts for Solution Providers which enables them to manage their business most effectively.
Not only is this new Chart of Accounts, in and of itself, an excellent way to help a Solution Provider improve the management of the business, but it then creates a beneficial chain of accountability for those who promote best practices. This is shown in the chart below.
The new Chart of Accounts, which we call the Normalized Solution Provider Chart of Accounts© is thus both an effective way to enable a Solution Provider to identify its predominant business model for purposes of external comparison and procuring best practices, it is also an excellent way to set up the General Ledger to enable most effective management of the business.
The Normalized Solution Provider Chart of Accounts© is available under a no-cost license.
In general terms, it enables the P&L (income statement) to provide actionable reporting on these major aspects of a Solution provider’s business:
- Revenue from Product Resale
- Revenue from sales of Owned Software
- Revenue from Services
- Infrastructure Services (4 sub-categories or practices)
- Applications Services (3 sub-categories or practices)
It permits reporting of revenue, COGS and gross margin by each of these, enabling management to make more informed and effective decisions about each practice and in the context of its Predominant Business Model©.
In addition, the Normalized Solution Provider Chart of Accounts© also permits reporting of expenses: index
- Sales and Marketing,
- General and Administrative (multiple categories).
This enables monitoring of the effectiveness of investment in sales and marketing, and leverage of other operating expenses.
As always, since we are business people and not CPAs, while we can recommend this Chart of Accounts from a business management point of view, we strongly recommend consulting with your CPA before making decisions about if and how to modify your own Chart of Accounts.