Lowering Your Wrap Rate

Did you make it into your desired beach bod state this summer?  Or was time for the gym illusive?  Did you cut back on the dessert or did you enjoy a ton of gelato?

Much like dieting and maintaining good health, government contractors must maintain a “sexy” multiplier/wrap rate.  Even if you are in a less competitive field or have a unique offering for a customer with a ton of funding (if you are, good on you), you must still monitor and maintain your wrap rate.

Companies can sometimes view this exercise as an annual corporate budget, where you occasionally look at how you are doing and often look back and ponder “what were we thinking?”  This is not enough by a long shot.  Best practice is to review your financials each month and include analysis on how you are performing on your wrap rate.  Review monthly, adjust quarterly, consider a complete overhaul semi-annually.

Most companies find that they need to tighten the belt a smidge, especially as we push into the fourth quarter.  For some, it may be too late to rein it in this year, but that doesn’t mean that you shouldn’t start pushing for the 2019 indirect diet.  For others, it may be a great time to lose a few pounds before the year-end festivities.  Here are some suggestions for both year-end and next year:

  • Space – do you really use it; do you need it and what is your company culture? Larger System Integrators are shedding their bloated infrastructure.  Don’t build one unless you’ve got 5-year POP’s with all contractor site rates.  And even then, keep it lean.
  • Wellness – When was the last time you competitively shopped your benefits? Or even your broker?  Don’t get tied up in the same old “we only have a 2-5% increase, so that’s great” mentality.  Depending upon your size, self-funding in some capacity may be of interest.  Does anyone actually use the vision policy?  What about dental?  Have you considered reducing your contribution?  Not always popular but it may lead to new work.
  • Training – with all of the online options these days, does your team really need individualized training or would an online package work? You could offer this benefit to more employees at a lower overall cost.
  • Education – consider reducing the tuition reimbursement if very few people are using it. It’s nice to tout to potential new hires, but in reality, it’s not a deal-breaker.  If it is, bonus the employee out to cover the costs.
  • Business Development – is the team on track to meet their goals this year or has performance been underwhelming? It is time to take stock of what’s working and what isn’t and shed a quarter’s worth of labor costs for non-performers.  Let them go now while the job market is still firing up.  Layoffs or terminations after Veterans Day essentially mean no job until after New Year’s.  Make the hard call now.

Keep working at the wrap rate and make sure it’s as lean as you can survive on.  Not bloated, but not extra thin either – you need a little wiggle room to ensure a healthy company.

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