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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
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.
Attention Builders, this one’s for you!
Job costing allows for accurate estimates to be provided to your clients, and in turn, protects you from getting short-handed. You do not want to start a project with a cash discrepancy; the best way to protect yourself is by using previous data to calculate costs on labour, material, subs, equipment rental and any other variable costs that may affect your profits. The historical data will also let you know where the losses and gains were on the previous project. When you are estimating on labour rates and hours, make sure you consider the level of difficulty the project will be for the crew, and how much time is required to look after them on-site. You also want to keep in mind any indirect costs such as taxes and benefits. Take your time to provide accurate estimates on labour and material costs, so that you can stay profitable!
Job Costing lets you know the status. One of the main purposes of job costing is to create a better schedule so that you can manage the crew more effectively— knowing exactly what the crew is doing on the project. This process eliminates waste in labour cost because you will be allocating your crew time properly, while it indicates where you are within your budget. You don’t want to go over budget and run into problems that cause you to go into a deficit. A schedule and job cost calculation will also indicate where you are at with the progress of the project and if you are on track. Make sure you are tracking the status of the project by creating reports and setting up red flag alerts in the system to spot potential issues, ex: if you are behind schedule and coming close to going over budget.
Job Costing lets you get more details from the field. Job Costing is about creating actual cost categories. Once you have the categories setup and communicated to your crew, the information coming from the field will be more relevant. The time cards will not just include the time coming in and out, but also what tasks they worked on each day. In addition, those that have access to the budget in the field will also include actual-cost-to-date information in their invoices, inventory receipt, and time card. Getting this extra information from the field will provide you with a better measurement of the actual cost associated to the categories you created for your project. The information will also help prevent overspending. Initially, the details and paperwork will be a lot, but once it is done, habits will be formed and your staff will get used to it, then the amount of work on your part will be reduced.
Job Costing will make you profits. It is in the details with job costing where it will save you money and lets you stay on track with the profits you wish to make on the project. Job costing is especially useful when you are tight on cash because you will be gathering actual costs associated with your project, therefore you will always be aware of how much cash flow you have on hand and know when you need to bill your clients so that cash doesn’t run out. Since you will be billing accurately, you will ensure that expenses never get ahead of income for a project. The ability to predict cash flow and know where money is being taken out from can make all the difference on how successful and profitable a project will be to your business.
Conclusion— Job costing allows you to manage your jobs more thoroughly because it takes in account the complete picture on cost. The system demands you to look into every detail from labour costs per task, to costs per cost category on a job. The biggest benefit of job costing is that it will protect your cash flow because you will have a better understanding of scheduling and cost. Too many times when contractors run into financial problems, it is because they are not profitable on jobs and run out of cash flow.
If you’re a builder looking to improve on this area in your business, sign up for a free Business Growth Strategy Session with Contractor Specialist Andrew Houston to discuss which areas you need to improve upon in order to maximize profits and scale your business. Click here for more details.
Scott used to dread running team meetings.
Prior to this month, Scott, a contractor in the Greater Toronto Area, used to dread running team meetings.
The stress he felt leading up to them impacted how he handled specific topics discussed during the meetings, and he often found himself being extremely reactive as opposed to proactive.
It wasn’t until his interactions with Profit For Contractors did he realize his lack of structure and focus was the reason the team meetings were not successful. Scott didn’t know how to properly lead his team in this scenario and therefore communication was often skewed or lost in team meetings.
“We know poor communication can unleash an array of issues when it comes to running a business” Tweet This
Scott discovered the simple Profit For Contractors tool that helped him change everything: “The Top 5 Money-Making Meetings Guide”.
With this tool he was able to:
- Learn how to prepare for meetings ahead of time so that he is more proactive
- Be a better leader to his team
- Communicate effortlessly
- Set agendas for meetings
- Stick to a specific timeline so meetings were short, but effective and precise
- Save 2-4% on their bottom line profits
- Hire a new manager to take over the task of running meetings
The relief Scott now feels from knowing he or his manager are leading effective team meetings is life changing. Profit For Contractors offers simple tools to help you work smarter, not harder and in turn teaches you how to use these very tools on quarterly webinars.
If you are looking to change the way you lead your team meetings, and ultimately, make more profits, then join Profit For Contractors on our next education webinar June 27, 2017, at 11:00am EST.
If you have any questions concerning this topic, feel free to contact Profit for Contractors at 613-604-4531 or firstname.lastname@example.org
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 email@example.com or give us a call at 1-613-604-4531.
This blog post is full of time management tips. To learn how to implement them into your business and workday, book in a quick 15-minute chat with us: http://bit.do/15minchat.
1. Create Productive Habits
Create a calendar that includes your goals and the details of your actions needed to complete those goals. Make sure you prioritize your actions and tasks so that you’re always working on the most important items. Do not multi-task, but rather work in block times. For example: 8am-9am check emails/faxes, 10am-12pm work on estimates and bidding, etc. This way you can focus on 1 task at a time without deviating from being distracted by too many items.
2. Motivate and Delegate
Cultivating a ‘no waste’ environment in your small business is extremely important! Get your employees involved and on-board by getting them to create their own calendars. Share your calendar with your team members, so that they are aware of when you are available for meetings. The calendar will aid in improving your communication with your team members. You should also start delegating work; one way is to develop an apprenticeship plan that focuses on getting team members trained on low-valued tasks. This in return will help you free up your time to focus on the high valued tasks. Have the details of the training laid out in a manual, so that you can leverage this process for any new hire.
3. Take Time to Check on Finances
The old adage that “Cash is King” is true, but we should consider time as a factor as well. Time’s value of money is crucial, especially in account receivable analysis. Many companies fail to keep up with the account receivables.
You should bill your customers right away. Every day you wait is another day without getting paid. Print your account receivable report every month or if you are in a cash crunch then every week, so that you will know when you need to initiate stronger collection methods.
4. Time and Projects
The most important thing that all contractors should be doing is responding to quotes on a timely manner. To achieve this, you need to first prioritize your tasks, so that you make the time needed to create a quote, because if you’re slow at getting it out, then you give your competitors a bigger chance to walk away with the win.
Always track your time, because during projects this will be a vital source that will help you generate a more accurate estimates on how much time you need to work on a project and it will prevent you from getting under cut.
Many contractors will take deposits upfront and bill end of projects, but when you do this you leave yourself open to running out of cash especially if it’s a large project, and that is why I recommend that you breakdown project fees into different stages of payment.
One of the easiest way to increase your income, is to pay attention to how you are spending your time, and then make adjustments to help you spend it better. Having time management as a vital role in your company will allow you to make better choices that will yield better results. Get proactive about time management and start conditioning your environment and do not let it condition you.
Register for a complimentary webinar on Jan 24 at 11:00am and learn how to free up your time in 2017 and stop leaving behind what’s important. Click here to register: http://bit.do/jan24-web
• 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.
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
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.
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Phone: (613) 801-0256
Location: 37 Moore St.
Richmond ON K0A 2Z0