Each multiplier is a dollar figure that represents the average amount of electrical products that electrical distributors sell to each particular type of customer, on a per-employee basis or other “economic factor.” (See Electrical Wholesaling's National Multipliers) When used with the employment figures in the regional profiles, the multipliers help you establish the amount of business electrical distributors could do with major customer groups in your area, and in total.
For instance, you can go into greater detail by using locally available sources of information on employment or other measures in end-user industries. The professionals at the nearest business library should be able to direct you to a source for the numbers you need. These multipliers are also a good option for determining sales in an area of the country not covered in the list of major metropolitan areas in the regional profiles. The same approach applies if you want to look at one county in an MSA that covers six counties. You would have to obtain employment figures or economic factors from local sources.
For instance, to find the number of electrical contractor employees in a place like Addison, Ill., a city not detailed in the East North Central regional profile, you could contact the local Chamber of Commerce, a nearby union chapter, the state university, the state's department of commerce or the local library to track it down.
These multipliers come in handy if you want to approximate the amount of sales available from a particular account. For example, if a manufacturer employs 300 people, by applying the multiplier of $630, you would expect the facility to purchase about $189,600 worth of electrical MRO product this year.
You can also estimate the size of the market with multipliers by building up sales potential piece by piece. According to the Bureau of Labor Statistics, there were 3,390 electricians working in Salt Lake City, Utah. If you multiply that number by the multiplier for electricians ($49,787), you get $168 million in potential sales. You would do the same for each of the other customer markets electrical distributors serve to reach a grand total for Salt Lake City.
Using multipliers results in a dollar figure for market size that tells the level of business electrical wholesalers in the area could do if every potential customer there bought a typical amount of product from them. It tends to be a larger number than actual distributor sales. You can also use EW's multipliers to track sales through different types of customers over time. Let's do that for sales through electrical contractors. As you can see in the chart on page 21, electrical contractor employment has its ups and downs. The challenge for electrical distributors is that since sales to contractors account for an estimated 36 percent of their sales, any change in contractor employment affects their sales pretty fast. Let's run a quick calculation. At the peak of the current business cycle in October 2007, electrical contractors had 943,700 employees, nationally. Using EW's multiplier of $39,510 in sales for each electrical contractor employee, that's $37.3 billion in sales at the market peak. With the drop in employment at electrical contractors, potential sales slid 18 percent to $30.5 billion.
2011 National Multipliers
|Electrical contractor*||Number of electrical contractor employees||$39,510|
|Commercial||Workers employed in professional and business services, retail trade, financial activities, educational and health services, leisure and hospitality and other services.||$159|
|Industrial MRO||Number of manufacturing employees||$630|
|Factory automation||Number of manufacturing employees||$115|
|OEM||Number of manufacturing employees||$640|
|Utility||Number of metered customers||$32|
|Government||Number of government employees||$164|
|Mining||Number of employees among mining companies||$357|
|*Use $49,787 as a multiplier if you are just interested in sales per electrician|
A basic forecast you can use for your cocktail party conversations over the next few month is this: Business conditions in the electrical market will pick up steam in 2011 with the commercial construction market lagging the overall recovery, the industrial MRO market outpacing most market segments and the residential market improving on a market-by-market basis.