ADOPTION OF NEW TECHNOLOGY
The top-rated business trend in 2020 is adoption of new technology. This is not new. Anyone who is running a business or making decisions about business growth has been clamoring to create efficiency through technology. In fact, over $4 trillion was spent by businesses world-wide on acquiring new technology, most of it for value creation.
One metric used by companies is sales per employee. By any measure, this metric is growing, undoubtedly due to new technology to create value. From 2018 to 2019 sales per employee in the manufacturing sector increased by over $200,000, which is a 12% increase. There are many new technologies that are driving this increase. One important advance is a sales-ready website. These websites are lead generations machines that are responsive and can be viewed on any device. They also enable direct contact with end customers who are becoming more involved in product design and delivery much earlier in the process.
In today’s marketplace, more detailed content and more online interaction between the customer and the manufacturer is the norm, and not the exception. Experts agree that employees in both large and small firms who have access to the latest technology will continue to outpace their relatively less sophisticated colleagues.
Written By: John Young, CCIM | Vice President
ADOPTION OF NEW TECHNOLOGY
WHAT IS YOUR RENT TO REVENUE RATIO?
One financial metric that many business owners are unfamiliar with is the industry rent-to-revenue ratio (I-RRR). The math is simple; rent paid divided by total revenue from operations. Naturally, some industries will pay a higher percentage of their revenue in rent; a retail shop will surely pay a different percentage of revenue to rent compared to a small law firm.
So what is your I-RRR? With data collected across the entire nation, manufacturers, on average, paid 1.78% of their total revenue from operations toward rent. In 2017, they paid 1.87%; 2018 they paid 1.77%; and in 2019, they paid 1.69%
The amount of rent a business must pay involves many factors. Location, site access, building quality, and, most importantly, market conditions are all factors. A business in New York City will certainly pay more in rent while a business in rural Minnesota may pay less. The formula is simple, but the underlying factors can be quite complicated. Many companies believe their I-RRR should be much lower during this economic slowdown. However, the dramatic drop in rents that occurred in 2008-2009 has not happened…yet. It is possible that large-scale business closures create urgency on behalf of landlords to make low cost deals, but it is not happening now. Stay tuned for more market information as we near the end of 2021.
Source of Data: Bizminer.com