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Why wouldn’t you value your own time and not give yourself a salary?
Many contractors go into business with one main purpose in mind and that is for financial security. Why do so many contractors forget to pay themselves a salary? As the business owner, you should get paid for your efforts. If you don’t pay yourself you will then struggle to pay your bills and put food on the table, and it eventually leave you with financial problems. In addition, it will affect your health as it will cause you stress and possibly even heart problems. Pay yourself what you are worth, it makes good business sense. Too many times contractors will either not give themselves a salary or they find themselves getting paid less per hour than their own team members! If you pay yourself for your efforts, you will find yourself more motivated to be focused on the growth of the company, and finding ways to make more sales.
Here are three things to consider when starting to pay yourself:
1. How much to pay yourself
When you are determining how much to pay yourself look at your cash flow projections and profits. Once you have figured out how much you need for operating funds, you should then put in your salary, which is your basic worth. How much you should exactly pay yourself will be dependent on the company’s development, but you should at least aspire to get your markets worth. Along with your market worth, you also include in your wages, the duties you perform, and the amount of time you spend working in the business.
2. Profit isn’t salary
Your salary shouldn’t be part of your profits. Profits should be calculated after you have paid yourself, because after you pay yourself you may find that you are actually operating at a loss. Don’t make the mistake of failing to value your own time in the same way you would value an employee’s time. Your personal financials should be separated from the business because you deserve to pay yourself a salary that is deserving of your time. If you end up pocketing wrongful profits, then how will you ensure your business’s longevity?
3. Set yourself a regular salary payment
This payment should be what you pay yourself every two weeks, or monthly. The payment should be consistent so that you can include that as part of your overhead cost. You don’t want to be paying yourself as much you want as this could cause you tax problems, and it can lead to incorrect financial numbers. Of course, with time as your business company grows more profitable you can than make changes to reflect that, but make sure there is a pattern.
If you want to succeed as a business owner, you need to start looking at the bigger picture and playing smart. Smart means that you are paying yourself a salary.
Ask yourself, these 2 questions:
#1) Are my wages equal to the duties that I perform?
#2) Does my pay reflect the amount of time I have spent in the business and the monetary investment I have put into it?
If you have trouble determining how to answer these questions, then maybe you need to evaluate why you came into business for yourself in the first place.
The Contractors Profit Plan is a FREE WEBINAR we’ll be hosting on Tuesday, Dec 12th @ 10am EST
4 WAYS TO CREATE ACCOUNTABILITY AND DISCIPLINE IN YOUR TEAM!
1. Set Goals
To create discipline you have to have a reason to be disciplined. Setting individual goals and team goals is a key way of achieving harmony in your business. Goal setting should be the very foundation you build your company on because it affects all areas of your business. The process of setting goals should be a collaborative effort because there is an important relationship between goal clarity and team effectiveness. One of the fastest ways to propel success is to have a team that has clarity on the action plan. It is very important to remember that how you define your goals also sets up your organizational culture. Those companies who have clear goals remove chaos from their structure and as a result, they improve productivity.
2. Create Structure
To achieve discipline you need to have structure. Each person’s roles and responsibilities need to be defined so that everyone knows what they are accountable for and how their roles impact the roles of others on the team. Create an organizational structure and show them examples how one team effects another, for example: if the installation crew provides bad quality of service it affects the sales team from getting referrals. Define the rules of the game, if you don’t outline rules nobody knows what’s inbound and out of bounds. Take note that when your company grows, it’s important to look at your teams’ roles and duties again, as things change such workload and the introduction of new team members.
3. Make The Team Accountability To The Team
Create an environment that requires everyone to participate, where the team benefits if they win together and consequences if they don’t work together. For example, you can set team targets in all areas of your business such as in Sales, Quality Control and Marketing, and if they achieve their team goal then everyone benefits. You as an employer also need to take responsibility for the team, for instance, if a team member is failing their team, then you need to step in and address the issue. You want to foster an organization that has open communication, where people can provide feedback on performances, this will help in curbing issues. When you create accountability in your environment it will off-set people from being lazy, blaming others and missing deadlines.
4. Systemize Habits
If you systemize habits, it will lead to more consistent outcomes from your employees. You don’t always want to be improvising because it’s simply not very productive, it leaves room for errors. Have systems in place that people have to follow with specific steps for how these systems need to be adhered to. For example, an installation crew needs to follow a certain checklist so that quality is assured. To produce more productive teams you can have a follow-up system of accountability, which allows for regular meetings that measure and track productivity. When you are drawing out the steps to systematizing a task it’s important to have your employees involved because they can provide valuable insight to the position. Once you have the steps layout, you should then have it all documented and posted so that the organization is clear on the process.
If you are struggling to find discipline in your team and you had hoped that common sense and basic respect for the job would be given, then I would highly suggest that you take a look at your workforce structure and see where you can systemize habits. Your role in the company shouldn’t be just to settle problems constantly, it should be about creating a culture that is based on accountability to each other so that productivity is always up. As the leader of the company you need to first set expectations for yourself and the team, and then model it.
5 Steps to Double the Success Rate of Your Quote
Quote Tip #1: Who is your Target Market?
It’s important to know who your target market is because once you’ve identified this you’ll be able to better research your ideal customers. Focus on the fears, frustrations, wants, and needs of your customers because this is one of the key factors in influencing your sales quote to getting approved. Customers base their decision on whether they should buy from you or not mainly on how much you relate to them i.e.: understanding their reasons for wanting this project done, their concerns, and whether or not you speak their language.
Quote Tip #2: Are you Making Money?
Always ensure that the quote price is sufficient to getting the job done and that you’ll be making a profit. In order to work out if your price is profitable, work out your “job costing”. In addition, get to know your margins! You need to know the net profit you make from each client who buys your products and services. If you understand how much you actually make from each sale, you’ll be able to work out what is required to cover your costs and make a profit.
Quote Tip #3: Understand your Capacity.
Before you quote on a job, always ask yourself, “can I provide the products or services in the quantities and timeframe requested?” Make sure you don’t quote beyond your means to deliver either in cost and/or time. Be confident in your ability to complete the tasks required. Research and review the proposal and consider your quote carefully before you commit to it. Never quote unless you’re certain you can deliver to their satisfaction.
Quote Tip #4: Do you have a Sales Process?
Develop a sales process so that you can systemize your quoting efforts and win more jobs. When you take a strategic approach with your quoting, you’re less likely to lose out on jobs. Take the time to create templates for quotes so that your presentations always look professional and consistent. Have a script prepared for each phase starting from the first moment of engagement. Present testimonials of your past work, as this will display your reputation and promise to deliver. Always deliver a quote in person.
Quote Tip #5: Be Proactive and Follow-Up.
Too many times contractors will spend time assessing the work, providing advice and preparing the quote but shortly after the delivery they disappear just waiting for the customer to call back. Be assertive, it is your right to ask for feedback. Feedback can mean winning a job, getting a referral or just you expanding your database for future opportunities. Treat quoting like an investment, where you deserve to know what your return is on it.
What is the Next Step for ME in order to Quote Profitably?
It is important that you track all your jobs so that you’re always making a profit and being competitive in your quotes at the same time. To help you get started, we’re giving away our Progress to Profit Dashboard™ tool. Get all your jobs on track to profit! You can grab your copy by clicking here.
Technology has come a long way over the decades. It provides many options to allow contractors to better master their business. Almost every aspect of a contracting company can be systemized using technology of some sort.
Back in the day, there were far fewer tools to help you do daily work tasks. It was a lot more grit, brain power, and hands-on work to get the job done. It required working long days including evenings and weekends, immense stress due to keeping it all in your own head, and a tired body from always being on the go.
It doesn’t have to be that way anymore. Let’s compare:
THEN: picture the contractor who used a dull pencil and wrinkled papers crammed into an overstuffed folder to organize their day, keep their team accountable, hire new employees, and track their profits. Chaotic, right?
NOW: picture the contractor who uses a smartphone and tablet to systemize many aspects of their business; no mess, just a piece of technology tucked into their work pants, ready to tackle the day at the click of a button. Easy, right?
While there’s nothing wrong with using ‘old school’ methods to run and systemize a contracting business, it can create a bit of chaos if not done properly. Let’s face it, working solely on paper and in your own head can be tough— and lead to missed opportunities, and chaos in the office and job site.
Instead of sorting through dozens of papers scattered all throughout the company van, why not use a digital app to keep you organized and the company systemized?
There are many examples of what technology can do for us:
Organizing our time: now we have Google Calendar, Self Control – one example of a free apps that can block distracting websites from you during the workday, and the ability to set reminders on our phone. After all, why keep all your daily tasks in your own head when you can see them in front of so that you never miss a beat?
Keeping our team accountable: now we have digital checklists connected to mobile apps for employees to use such as the free online tool Trello. We also have software that can track your teams’ work hours such as ExakTime. Why just assume your team is working efficiently without you being there— know for sure so that you’re paying your crew for the time and effort they truly put in.
Hiring new employees: now we have the Internet and plenty of sites to help us find the perfect candidates for a job opening. Kijiji, Craigslist, Indeed, Monster, and Workopolis to name a few. Why just post the print ad on your office window and hope people will drop by— post it everywhere so you get more opportunities to work with only the best.
Tracking profits: Now we can hire employees to use QuickBooks or put together easy-to-read spreadsheets in order to stay on top of our financials. Why just hope for profits when we can plan for them?
At Profit For Contractors, we understand the struggle of keeping it all in your own head and not having the time to look for technological tools to help you better organize and systemize your business. It’s why we’d like to help you.
On our upcoming FREE webinar: “Systems & Procedures to Help you get CONTROL of your Business” we’re discussing the top systems contractors are using to maximize profits, get control of their teams, and get time back. It’s happening Tuesday, April 25th, 11:00am EST. Save your spot today by clicking here.
If you have any questions contact us at firstname.lastname@example.org or give us a call at 1-613-604-4531.
• I feel imprisoned in my job; drowning in an extremely long To-Do list.
• I’m working on tasks that are way below my pay grade.
• I’m too involved in simple routine tasks that my employees should be handling.
• I’m not making the profits I deserve considering the work I put in.
• My cash flow is like a rollercoaster—totally unpredictable and, sometimes, scary.
• I want to take my business to the next level but don’t know where to start.The list of challenges a contractor can face in his business can be endless, making you feel overwhelmed and discouraged. You’re probably an amazing tradesperson but, when it comes to playing a businessperson, it’s a whole different show.
So how do you master your business in 2017 and make it the best year ever?
Know the 3 core pillars that make up a successful contracting business:
1. Time & Team
2. Profits & Cash Flow
3. Marketing & Sales
Know the order of these pillars and the reasoning behind it. Time & Team comes first because, if it’s out of control, you simply won’t have time to focus on improving your profits, cash flow, or marketing and sales.
Profits & Cash Flow comes second because you need to know whether you’re doing profitable work before you go out, land more work and market yourself out of business. When you’re unable to forecast your cash flow, and you get more work than your bank account can handle, you can go bankrupt very easily.
Once you have a handle on your profits, you can identify both the types of work and the clients that are more profitable, which helps you amp up Marketing & Sales.
Create a plan relative to the 3 core pillars that will help you see quick results. Start by joining me and Electrical Business Magazine for a Planning for Profits & Freedom in 2017 webinar on January 12, 2017, 2 pm EST. During this workshop, you will:
• Learn how to plug leaks in each of the 3 core pillars.
• Learn strategies for systemizing aspects of those pillars within your business.
• Learn how to be more profitable.
Meantime, let’s have a look at some top core pillar strategies for you to try out before January’s webinar workshop. These strategies will deliver the best results in the least amount of time and with the least amount of effort.
Time & Team top strategy
Draw three columns on a blank piece of paper labelled: Tasks, Value and DSEK. Under Tasks, write down everything you do (yes, it will be a long list). Next, estimate a value beside each Task in terms of money, time, etc. In the last column, determine what should be done with every task. Are you going to:
Circle the lowest-value tasks and get started!
Profits & Cash Flow top strategy
Compile time sheets and costs (material and other). Add them up and compare to your quote to determine whether you’re profitable on the work you’re doing. Leverage this data to determine team efficiency, and whether the type of work you’re doing—and for whom you’re doing the work—is a good fit. Knowing this is a game-changer for your Profits & Cash Flow!
Marketing & Sales tops strategy
Start using a client feedback form on every job; ask clients to fill it out while your crews are cleaning up. Have them rate the quality of work, cleanliness, promptness, etc., of your company. Include a testimonial and referral section. Now you have something you can show your next prospect to prove you’re the best contractor for them and the job. I call it “Trust Transference”. Stop saying you provide good quality and service and start proving it. (Added bonus: this is also a great document for employee reviews.)
In closing, when you register for our workshop webinar, you’ll get a copy of our done-for-you feedback form plus the Contractor’s Toolbox of Strategies tool, which gives you over 70 strategies for improving each of the 3 core pillars.
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 email@example.com
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 firstname.lastname@example.org
Unfortunately, not everything is within your control. You know that if your suppliers raise their prices, product price goes up, and what you charge your customers will have to too in order to maintain profits, or worse, take from your own pockets.
You’ll probably want to offer up dozens of discounts in other areas in order to maintain clients, but bending over backwards like this can be just as damaging to you and your business than outright telling your customers, like a cold slap in the face, that there’s going to be a price increase.
There’s got to be a good middle ground!
Here are 4 tips that will help you make the transition:
1) Know the ‘secret psychology’ of your customers. What is important to your customers beyond just price? It could be family safety, cleanliness, timeliness, amazing craftsmanship, professionalism, etc. When you go to your customers, keep in mind the key elements that make you and your company unique and better than the competition, in order to keep your customers.
2) Provide them the information ahead of time. Whether it’s online through blogs or social media, through personal email, or in-person, write about the fluctuations in the economy, talk about suppliers costs going up, and discuss seasonal changes and their effects on a contracting businesses— explain the what, who, when, how, and why. If you’re able to have an informal conversation relevant to price increases ahead of time, it lessens the blow for when it comes time to tell your customers prices are going up.
3) Practice having this conversation in a team meeting. Grab not only your sales and marketing team, but everyone you can! The more people that practice and know what they’re talking about, the better. Enough practice leads to a conversation that truly sounds authentic (because even if it really is, it can sometimes come off as an act to your customers; they’re smart and know what sounds valuable.)
4) Don’t get intimidated. There will always be customer’s that push back and argue over everything. Does that mean you should offer up dozens of discounts in other areas to please them? Not necessarily. Does that mean you should cave and maintain price just for them? No. Does it mean you should offer up a lower quality service or product in order to keep them? Not recommended. The thing is, you most likely will lose a few customers— these are customers we classify as ‘D’s as they only care about winning best price. In a professional, polite way, you must explain in detail why prices are increasing and how it’s important, as well as why they should stick with you (reflecting back on the ‘secret psychology’ and your practice conversations.)
When it comes down to it, telling customers your prices are increasing is never easy. Showing value to your customers in other areas, is. Rating clients accordingly will allow you to determine which clients can be offered specific discounts or deals, and which will be content with a polite explanation of the situation. If you’re curious about the ‘secret psychology’ of customers or how to rate your customers from class A-D and what that means, we have specific tools to help. Click here for a chat with Andrew to find out more.
All the best, Profit for Contractors.
At Profit for Contractors we’re dedicated to helping you and your business flourish.
With nearly a decade of successfully helping contractors fix and grow their business to its utmost potential, we’re confident we can help you too. Constant help is always at your fingertips, and with a little work, your goals can become a reality.
CONTACT US NOW
Phone: (613) 801-0256
Location: 37 Moore St.
Richmond ON K0A 2Z0