LOW VOLTAGE AND AV · ELECTRICAL AND TECHNOLOGY · FIXED BY STEP 01

Your Distributor Credit Line Sets Your Revenue Ceiling

The hardware is half the contract and it buys on a net-30 line from ADI or Almo, while the GC pays 90 days later. A credit manager who never saw your backlog sets your ceiling.

WHY IT'S A LOW VOLTAGE AND AV PROBLEM

A framer buys dimensional lumber that three suppliers can fill, at maybe a fifth of contract value. Half or more of your contract is manufacturer hardware, single sourced through ADI, Almo, Exertis, Snap One, or Herman, and the credit line at that distributor is a hard number that doesn't flex with signed backlog. So the ceiling on your revenue gets set inside a credit department you've never visited.

WHAT IT COSTS

The size of it

One $400K job with a $240K bill of materials can absorb the entire line for a quarter. The next job either waits, or you buy it COD and give up roughly 2% of the biggest line item on the job.

OVERHEAD AT $1M to $5M

16%

CFOS target 15% for low voltage and AV.

GROSS MARGIN AT $1M to $5M

24%

CFOS target 26.5% for low voltage and AV.

NET PROFIT AT $1M to $5M

CFOS target 11.5% for low voltage and AV.

On a $400K install, the displays, DSPs, codecs, control processors, cameras, and switches can be $240K of it, and that gear ships from distribution on a net-30 line with a ceiling set months ago. You pay for it in 30 days. The GC pays the pay app 60 to 90 days after month end, so the cash comes back around day 120. That stretch of time is why the second and third job of the quarter feel impossible, and hiring another installer does nothing about it.

WHAT TO DO

Three moves, in order

STEP 01

Put every open job on one page with four dates for PO placed, distributor invoice due, pay app submitted, and GC cash expected. The distance between column two and column four is what you're financing.

STEP 02

Track open distributor exposure as a live balance by line, updated the day a PO goes out, not when the statement comes in.

STEP 03

Take signed backlog, contract documents, and job cost detail to the distributor's credit manager and ask for a project-specific increase. Credit managers move for documentation and they don't move for a phone call.

THE FIX

Step 01: Job cost structure

Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words.

CFOS-01 · CHAPTER 1

Job cost codes that match how you bid the work

What this step changes, what it depends on, and how to tell it's installed.

BENCHMARKS

Low voltage and AV by revenue band

All 7 bands are published. The CFOS target is beside the figure up to $10M to $25M, and the 4 bands above that are labelled modeled.

ACROSS EVERY TRADE

Cost codes the field ignores

You have 200 cost codes. The crews use four of them, and one is called Miscellaneous.

SAME TRADE

What else costs low voltage and AV contractors money

LOW VOLTAGE AND AV · CFOS-06

Shop-Built Racks Stall as WIP With No Billing Against Them

You loaded, terminated, burned in, and tested the rack in your shop because that's the cheapest place to do it. That's also the one place it can't be billed.

LOW VOLTAGE AND AV · CFOS-04

You Bid a Model Number, Then It Goes End-of-Life

Copper moves and comes back. A model number that gets discontinued never comes back, and the spec still calls for it.

LOW VOLTAGE AND AV · CFOS-06

Commissioning Waits on the Owner's IT Department

Your commissioning crew is mobilized, on site, and idle, waiting on a help desk ticket. No one on the GC's schedule owns that date.

LOW VOLTAGE AND AV · CFOS-07

Your Own Closeout Releases Your Month-Three Retention

Retention comes off the rough-in cable bill in month three and releases at final acceptance in month twenty-four. Your own training session is the event that releases it.

LOW VOLTAGE AND AV · CFOS-03

Parts Are Covered. The Truck Roll Is on You.

The manufacturer warrants the box. Everything it takes to get a tech up a ladder to swap that box comes out of your overhead for twelve months.

SAME MECHANISM, OTHER TRADES

The same mechanism in other trades

CONCRETE

Ten Jobs Used Those Forms, One Job Paid for Them

Your yard is full of panels and shoring, every job report says you made money, and the bank account disagrees. The form buy was charged to job one and jobs two through ten absorbed none of it.

DEMOLITION

The Scale Wants Cash Today, The GC Pays In Sixty Days

Almost everything a demolition job costs goes out in the first two weeks, and the first pay application hasn't even been submitted yet.

FLOORING

You bankroll the mill six months before you get paid

The mill wants a check before it ships, the GC won't pay for stored material, and your cash is stuck in a warehouse for four months waiting on a space that isn't ready.

QUESTIONS

What low voltage and AV owners ask

AV distributor credit limit stopping me from taking more jobs?

The hardware is half the contract and it buys on a net-30 line from ADI or Almo, while the GC pays 90 days later. A credit manager who never saw your backlog sets your ceiling.

What does it cost?

One $400K job with a $240K bill of materials can absorb the entire line for a quarter. The next job either waits, or you buy it COD and give up roughly 2% of the biggest line item on the job.

What do I do first?

What are low voltage and AV contractors supposed to be making?

Low voltage and AV has 24% gross margin, 16% overhead and 8% net profit after taxes at $1M to $5M. The all-trade average is 7%, so this trade is 1 point above it. The CFOS target is 11.5%.

Which part of the system fixes it?

The step is number 01, job cost structure. Seven cost categories and three levels of granularity, built so the estimate and the ledger use the same words. It comes from chapter 1 of CONTROL: C.F.O.S. Construction Financial Operating System.

OR HAVE IT HANDLED

Everything on this page is something you can install yourself, and CONTROL is the order to do it in. If you would rather buy the finished result, SPM The Construction CFO does this work for low voltage and AV contractors as a service. It is a separate firm, Sulphur Prairie Management, LLC, led by the same author.

What a fractional CFO does for low voltage and AV contractors

AUTHOR

JOSH LUEBKER

MASTER ELECTRICIAN · 150+ PROJECTS · $2.1B+ MANAGED

Wrote CONTROL, the 8 step system behind these figures. More about the author.