Bill Weidmann of Weidmann & Associates in Alpharetta, Ga., found it hard to compare his company to other companies in his networking group. The group had large and small companies, and comparisons using owner salaries only told part of the story. “We had people with a high volume making a lot of money and doing a great job, but we also had smaller companies doing an outstanding job that were not getting recognition,” he says. So Weidmann created something the group dubbed the “efficiency ratio.”
The owners of large-volume companies could be taking home more money, but taking home a smaller percentage of their volume than smaller companies. “If you have a higher percentage, you are more productive,” Weidmann says. That is where the efficiency name came into it. The group now compares member companies both by total income and by efficiency ratio.
Weidmann says it is just one of the tools he uses to evaluate his company. He uses it to compare himself to the group, but also to motivate him to improve his company's efficiency. He suggests to remodelers that if they improve their efficiency, they should give themselves a raise.
Note: Les Cunningham uses the inverse of this efficiency ratio to rate the members of his networking groups. He calls it the “risk quotient.”
The lower the number, the stronger the company. See Benchmark, “Worth the Risk?,”(January 2003) for more information.