Regarded as one of the National Association of Electrical Distributor (NAED)’s most popular offerings, the NAED PAR Report® provides benchmarks for distributors’ key financial categories. Based on the previous year’s financials, the annual report offers distributors an important way to evaluate the financial performance of operations, assets and sales. Additional breakouts such as sales volume, customer emphasis, number of locations and geographic regions provide greater analysis and comparisons to other companies like yours.
The NAED PAR Report®, which has been around for decades, provides benchmarks to distributors who want to see how they are performing financially and if their operations are in good shape.
“The report covers a number of different operational areas and provides an important set of benchmarks for individual companies and the industry overall,” said Erika TenEyck, director of business intelligence programs & insights, NAED. “This benchmarking report brings so much value to participants since it provides not only a way to track one’s own operational metrics, but also gauge performance with other distributors. While your company may be doing well, the report helps to answer how well since the results reflect the operational performances of many different companies from across the industry.”
The NAED PAR Report® is designed to help electrical distributors evaluate their own performances relative to that of similar companies in order to identify improvement opportunities. The statistics in this report represent broad performance “yardsticks” against which a company’s performance can be measured. It is important to note the following points when analyzing the results:
1. A deviation between your company’s figures and the numbers in the report does not inherently indicate a positive or negative outcome. Rather, it suggests the need for additional analysis. As a general guideline, larger differences between your company’s performance and the report’s aggregates warrant further investigation. This enables you to delve deeper into the factors contributing to the variations and understand the potential implications.
2. In situations where significant deviations are observed, it can be beneficial to review or calculate the same performance measure over the past several years. This longitudinal analysis helps identify trends that may exist, providing insights into whether the observed differences are persistent or temporary. By assessing performance over time, you can gain a better understanding of your company’s trajectory and pinpoint areas that need attention.
3. It is important to view the information in the report as a tool for informed decision making rather than absolute standards. Companies vary in terms of their sales/customer emphases, geographical location, size, and other factors. Therefore, two companies can be successful while experiencing distinct outcomes in certain performance measures. It is crucial to consider the specific context of your company and understand how these unique factors may influence performance. The report serves as a benchmark for comparison and provides valuable insights, but it should be interpreted in light of your company’s individual circumstances.
“Like many other organizations, we use the PAR Report to benchmark key indicators in comparison to our peers and to analyze industry trends,” said Cara Gordon Potter, CEO of IMARK member company Gordon Electric Supply. “In addition, we utilize it specifically to identify target areas where we have a need for improvement so we can take action. For example, if we see that our warehouse costs are higher than our peers, we can take a closer look to identify where we may be able to improve our efficiencies. It has been especially useful for us in identifying proper staffing levels, and improving our overall organizational structure compared to others of our size and compared to highest performing companies.”
After participating for many years, the report has also been a great historical resource for Gordon Electric Supply’s annual company performance and contains far more reporting and metrics than the company regularly analyzes.
“We also feel that by participating we are giving back to the industry in a small way,” Gordon Potter said.
Each year the PAR Survey collects information from the previous calendar year. For example, the 2023 PAR Report® is based on the results of a 2022 survey that asked NAED and IMARK members questions about their income statement, overall sales, balance sheet, gross revenue and gross margin. If you are a member of NAED or IMARK, it is free to participate in the survey. Survey participants receive the comprehensive Industry Overview Report at no cost.
Submitting Your Data
“There are a couple different ways to submit survey data,” TenEyck said. “We work with a company called Industry Insights. They have a portal where you can submit your information online. This is a nice option because if you have participated before, your previous information will appear in the online tool. There are also note fields to help track how you arrived at your calculations. If you do not wish to use the online tool, you can also download an Excel spreadsheet of questions and upload it to the site when you’re ready to submit. Lastly, you can work directly with Industry Insight to submit your financial statements to complete the survey.”
The 2024 PAR survey is scheduled to open the week of February 19 and to close April 25, which gives distributors plenty of time to complete it.
“One of the reasons we use a third party is so distributor members and IMARK members can feel confident in submitting their information,” TenEyck said. “No one at NAED sees individual results; we only have access to the aggregated results.”
“The survey asks mostly for income statement and balance sheet information. There are other questions—i.e., number of employees and what departments the employees work in—ancillaries that allow us to provide better benchmarks, but the key performance metrics come from financials,” said Scott Hackworth, president, Industry Insights.
Hackworth said a recent follow-up survey revealed that 100% of those who took the PAR Report® survey said that it is somewhat easy or very easy to complete.
“The PAR Report survey is certainly valuable to everyone but there is extreme value the first time you take it,” Hackworth said. “Its value increases over time because of the trends.”
A valuable feature of the NAED PAR Report® is that all companies participating in the survey have the option to receive their confidential Company Performance Report (CPR) and access personalized, interactive tools that are available through the NAED Research Portal (NAEDPARReport.com). This portal offers the ability to compare performance benchmarks specific to your organization with those of close peers in the industry. Such resources enable companies to gain insightful perspectives and make informed decisions for improvement.
The CPR displays each distributor’s own ratios and data computed in a manner consistent with those appearing in the full report, which is available at an extra cost, and the results are displayed alongside the appropriate industry comparatives. As shown on any given line of the CPR, a company’s own data are included along with reported norms for all respondents and for companies of similar sales volumes and sales paths. Thus, the individual owner/manager is provided invaluable information without needing to spend time and effort performing the calculations manually. In addition, these highly confidential reports contain a graphical depiction of industry performance trends as well as a qualitative assessment of a company’s situation.
In addition to receiving access to the CPR, participants who purchase their results will also receive access to an interactive “Searchable Results” program that allows more specific information than any single report could provide.
The actual CPR that participants receive contains more than 30 pages of information about their organization, compared against other similar companies.
While it is important to analyze financial information in dollars and cents, it is essential that percentages and ratios be used if the data are to be compared to past performance or to reported standards. For example, while it is helpful to recognize your annual employee compensation expense, it is even more essential to compare this expenditure with the value it produces. A particularly useful measure of the effectiveness of your compensation expense is the percentage that payroll expense represents relative to sales—or gross margin. A ratio such as total payroll expense as a percent of sales can be useful in determining how your company uses its payroll dollars over time or compared to closely aligned businesses.
In addition, just as dollar figures are not overly meaningful by themselves; ratios should not be used in isolation. In combination with the amounts themselves, ratios can provide an extremely accurate overall picture of financial performance and financial position. Financial performance refers to how well a facility performs over a period of time (generally one year) and financial position refers to financial strength at a given point in time (primarily based on your balance sheet).
Most of the results included in this study are reported on the basis of medians rather than arithmetical averages or means. Unlike the mean, the median is not distorted by a few unusually high or low values that may exist in the sample due to special circumstances. The “median” value represents the mid-point of the data for a particular measure, with one-half of the firms reporting figures above it and one-half below. Each median was computed independently based on the companies that reported for that item. As a result, mathematical relationships do not always exist when different ratios are used together in the calculation.
The tables in this report are organized to include several important financial ratios for each relevant “grouping” of similar firms. In particular, the major “groupings” used include:
- All Distributors
- Best in Class (top 25%, based on Return on Assets Performance)
- Distributors by Net Sales Volume
- Distributors by Customer Segment (based on sales by segment)
- Distributors by Warehouse Sales
- Number of Branches/Locations
- U.S. Region (based on location of company headquarters)
Even relatively simple analysis of your organization’s own figures using the data for comparisons can yield important insights into your business.
“The No. 1 benefit is understanding how your business aligns with industry benchmarks and how you are trending versus the industry,” said Hackworth. “We are noticing industry shifts lately—sales growth has been extreme, and profitability has been strong for the industry. If I was running an electrical distribution company, I would want to know if my metrics are aligning with my peers.
If not, I would drill in to see where I differ and why I am not seeing the positive results others are experiencing. There is a lot of opportunity to learn about your company and to see where you are strong and to identify weaknesses to correct course.”
For more information, visit https://www.naed.org/par.