How Types of Work will Affect your Profits

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.

 

Here’s how:

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 support@profitforcontractors.com

 

Pricing as a Contractor

I’m just going to flat-out say it: most contractors I know are under-confident and under pricing.

 

Which is understandable— there’s a very fine line you need to follow when it comes to pricing. And as we all know, often times, clients will base their decision off the lowest price offered— no ifs, ands, or buts.

 

So how do we go about changing this? How do we get confident about our pricing, so that we price at something reasonable and doable for ourselves, while still landing clients?

 

How do you price? Most contractors sell hours, blocks of hours, or months of their time or their teams’ time.

 

Ex: “My hourly rate is this ________.” Or “you can buy a six-pack of options for ____________.” Or: “This project is going to cost you ___________.”

 

Think about what you’re doing when you use messages like these. What are you really saying?

 

You’re just selling like everyone else. You’re selling just time and materials. You know this much per hour and that much for labour, and this much for materials.

 

That’s old-school thinking.

 

Let’s start winning jobs not only based upon price of labour and materials, but also based upon you.

 

So how do we pick a premium price and know we’re worth it?

 

It’s really simple. You just need to think a little deeper.

 

You need to know two numbers:

 

1) What’s the cost of not hiring you?

How much will it cost this prospect to fix mistakes done by a contractor who’s not qualified nor licensed? What are the financial repercussions if it’s done wrong? What are the health repercussions to them and their family? Think about the mental and emotional stress that could happen by choosing the wrong contractor.

 

How much is your being licensed worth? How much is your amount of years’ experience worth? How valuable is your promise to do things right on everything, on time? How valuable is your guarantee of keeping a clean and safe workspace— using only the best and most cautious procedures when working in a family home?

 

2) What’s the potential ROI (Return on Investment)?

What is the value of enjoying your work for a lifetime? What sort of increase in property value can you give them by means of additional features? How much more efficient can you make their lives?

 

What is the value of good workmanship? What is the value of an expert’s opinion? What is the value of not having to re-do a project come 10 years time? What is the value of knowing their house is worth more now because of the additions you suggested they do?

 

Once you determine these two numbers, it’s really simple. You pick a price that is an incredible deal for them in terms of the ROI they’re going to get, as well as a price that’s good for you.

 

That’s how to price for you.

If you have any questions about this article, or would like more insights on how to price as a contractor, please don’t hesitate to contact us.

 

Our hours are 8am-4pm Monday-Friday EST.

 

You can reach us at 613-604-4531 or through email at support@profitforcontractors.com