What do you believe to be the most rewarding thing about owning your own business?
Is it getting to choose the employees that work for you? Is it the culture you get to create? Is it the freedom of leaving early on a Friday just because you can?
If you’re thinking right now, “I don’t get any of those things from my business!” Then keep on reading in order to find out why.
Here at Profit for Contractors, we teach business owners of the trades about the 3 important pillars that construct any contracting business: Time & Team, Profits & Cash Flow, and Marketing & Sales.
Which pillar do you feel carries the most weight?
You got it— PROFITS & CASH FLOW.
There’s no way you’ll have the ideal staff if you don’t have the means of paying for someone with experience. There’s no way you’ll get to run a business with the culture you desire if you’re always scrambling to get things done and scraping up pennies just to make it to the next month. And there’s certainly no way you’ll be able to take off a few hours on a Friday if you’re behind on getting paid and unsure you’re profitable on the jobs you’re currently running.
Unfortunately, cash is king. That’s something we have to always remember when it comes to running our own business.
Maximizing profits allows us to create a business that essentially acts as the vehicle to pay for our freedom.
Here are some top reasons why maximizing profits is so important for a business:
1) You can pay other people to do the things that are out of your pay grade
2) There’s less stress weighing down on you not only at work, but at home
3) Less time you have to spend at work evenings and weekends
4) You get to pay yourself more
5) You can afford to put systems in place to automate your business
6) You can grow the value of your business
Now, who doesn’t want to increase their profits?
But here’s a question for you: do you test and measure the different types of work you do in order to know which are the most profitable and which are the least profitable?
Here’s an example: Let’s say you do residential, industrial, and commercial work.
You make 10% gross profits on residential, 20% gross profits on industrial, and 30% gross profits on commercial work.
You would have to generate 50% more sales in residential just to make the same profits as you do in industrial, and you would have to get 100% more residential work in order to make the same profits as industrial.
Think about the effects of having to increase your sales by 50%-100% just to make the same profits:
- You would have to quote more
- Your overhead would go up because you have to do more work (more crews, more material)
- The amount of time to manage the jobs goes through the roof
- More work typically means more call backs (requiring more of your time and more arguments amongst the crew)
- Your cash flow tanks because as we know, you have to pay for your material and pay your guys before yourself
- You overall risk more
When you focus on getting the types of work done that are most profitable, you flip every one of these negative effects around and start to build a business that maximizes its profits.
STEP 1) List the types of work you do
STEP 2) Get your bookkeeper and admin person to systemize the paperwork coming in from the crews, so that the material and labour for each type of work are separated
STEP 3) Determine the gross profit average for each type of work
STEP 4) Inform your sales and marketing team that you need to create a new marketing plan to land more of the higher profit jobs
STEP 5) Put the plan into action!
Focusing in on the most profitable types of work can be a game changer for your business. Just remember that every day is a chance to maximize profits, or lose them. Your job as the owner is to ensure that every type of work your team does, maximizes profits with the least amount of effort.
Keep in mind; this is just 1 method of many in regards to maximizing your profits.
You can have the freedom you desire, you just have to do the right work for it.
If you want more information about this topic, or have any questions about the services we offer, please visit us at profitforcontractors.com or send us an email at firstname.lastname@example.org