Why is it important to use a consistent vocabulary in your integration business?
On this episode of ClearTalk, Brad Malone and Joel Harris join our CEO, Brad Dempsey, to talk about why integrators need to develop a consistent vocabulary.
Every word has a meaning and that meaning conveys information.
“What I find is that when people are either lazy in their language or internally inconsistent, we’re not sending a message, we’re just sending words,” says Malone.
People have become more passive with their language, and especially with the move to virtual, it’s even more important that we are all on the same page and not just nodding our heads. Then we leave the meeting and say, ‘Oh, I think he meant this.’ If we are not aligned in terms of language, how do we move to action?
It is incredibly important to be precise and disciplined in our language to convey a single message to everybody involved.
Does your integration company use a consistent vocabulary?
Does everyone in your integration business understand the difference between Revenue, Sales and New Orders?
Depending on who you’re talking to in an organization, we all seem to forget that these words have very different meanings.
“We act like we’re at McDonald’s ordering a hamburger,” says Harris. “We think an order is the same thing as a point of sale of revenue. In your project-based business, you have a new order from a customer that turns into a sale that you can execute, and it’s only as you apply goods and resources to that sale can you then turn it into revenue. But when your CFO is busy talking about sale, pretending it’s revenue, you really confuse your organization as to what you are talking about.”
Having a clear distinction between new orders, sales, and revenues is critical for integrators to understand.
Only then can you begin to dialogue about the metric you’re actually talking about.
What about gross profit (GP) versus gross margin (GM)?
“Gross profit is dollars, it’s money, whereas gross margin is a percentage – they are not the same thing,” says Dempsey.
Many integrators us Markup and Margin interchangeably, but they are actually quite different.
A markup is when you take a cost and you apply a percentage to it to end up with your selling price. Sales always starts from the markup side because they start with the manufacturers costs.
Margin is what accountants talk about, or business finance analysts, because they want to know when the integrators sold it, how much of that was profit?
Both of these numbers are percentages, so it can be confusing, but they’re not equal.
A 25% markup is not equal to a 25% margin.
There’s a formula to get between them, which we will go over in a future video, but what we have to remember is that if we have a 25% markup, that does not mean we have a 25% margin.
The margin will be a smaller percentage than the 25% markup.
Also on the podcast, we discuss the differences between:
Scheduling versus Assigning
Cost, Price and Budget
Watch the video for all this and more!
ClearTalk Ep 07: Say What You Mean…And Mean What You Say
