The Impact of Termination Speed on Bottom Line Profit

Stay Informed

As a network cabling contractor, you need to keep an eye on product costs. When it comes to the cabling products you choose, you’re balancing your customer’s needs against what works for your bottom line.

But it is important to remember not every bottom line benefit can be measured in the product cost you see on your invoice. Sometimes a product’s ability to make you more efficient can outweigh the purchase price.

Termination Speed

A great example of this is termination speed. As a contractor, you know labor costs are a major component in a cabling project. This is also an area where customers may look while trying to cut their own costs. It makes sense that if you can bid labor costs that are lower than your competition, you stand to win more business.

Of course, you also can’t slash your labor costs below the point of profitability. The key is driving labor efficiencies that give you enough breathing room to bid lower labor expenses without sacrificing profitably. Simply put, you need to be able to get it done faster. A faster project timeline can enable you to bid lower than your competitor, win the job, and still turn a profit.

Profit Impact 

A basic Cat 6 UTP job can illustrate how termination times impact profits. This sample examines a theoretical 1000-drop Cat 6 project. To make it easier, let’s look at the termination jacks only, not pulling cable or testing. This is obviously a simplified look at one aspect of a project, but it does a good job of illustrating how the time saved per jack can add up to significantly better profits and better your chances of winning the job.

Let’s start with actual termination times. Outlet A can be terminated in one minute, outlet B in two minutes, and outlet C in three minutes. When it comes time to calculate a bid, you’re not going to base your labor estimate on the exact termination time – that would leave no margin for error and would be totally impractical in the real world.

 

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Add two minutes to the actual termination time for each outlet to calculate your bid estimate (as you can see in the table below). While you’re estimating a lower labor cost on the bid for outlet A than for B or C, you are in fact giving yourself more room between your actual termination time and your bid estimate. For outlet A, your bid estimate is 3X higher than your actual time. Outlet B cuts it to 2X, and outlet C leaves just a 60% cushion. That extra room can have a significant impact on your profitability.

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The potential benefits for your bottom line become clearer when you start including hours and dollars as in the table below. For outlet A you calculated your bid on a 50-hour labor estimate, based on 1000 outlets at 3 minutes each. At $65 an hour that’s $3,250. That’s a good deal lower than both B and C – so you're putting yourself in a strong position to win.

If you look at your actual termination time, the job takes just under 17 hours. It would take you 2 and 3 times as long with outlets B and C. Even though you bid your labor significantly lower with outlet A, you are actually much more profitable, making around $195 an hour vs. $130 and $108 for outlets B and C. When all is said and done, you made as much money (and maybe more) with outlet A, but were able to bid lower and win the job.

 

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While the previous example might get you thinking about the benefit of faster terminations, what if you could terminate that Cat 6 jack in just 30 seconds? Under the same scenario as before, the ability to terminate outlet A in just 30 seconds doubles your profitability. You’re making $390 an hour and absolutely killing your competitors. You’re doing the job in a bit over 8 hours compared to 50 hours for the person who chose outlet C.

 

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You may be thinking that 30 seconds per jack is a bit aggressive. While it’s absolutely aggressive, it’s not at all impossible! In fact, some manufacturers offer two separate Cat 6 outlets and termination methods that come in under that 30-second benchmark.

Edging Out the Competition

In today’s hypercompetitive marketplace, everyone is trying to do more with less, lower costs, and increase profits without sacrificing quality. Being able to significantly and confidently reduce cable termination time is one sure way to accomplish all of the above.


The opinions expressed in this piece are solely Siemon's. They do not necessarily represent WESCO’s views.