The latest statistics on fraud should send a big jolt of fear into small business owners. According to an embezzlement survey by HISCOX, a specialty insurance company, 80 percent of embezzlements occurred at small businesses — defined as those with less than 150 employees — and 30 percent of embezzlements involved a loss of more than $500,000.
The first time I witnessed someone stealing money from a company I was shocked and dismayed. I couldn’t believe that someone in the financial management field could be so unscrupulous – after all, by nature of their job in accounting, they are the gatekeeper of a company’s money.
At the time I was 29, and that experience opened my eyes to understanding that having financial controls in place is critically important. In the years since I’ve seen many instances where a company’s lack of controls has resulted in people stealing from them.
In this time when more and more work is being done remotely, including paying vendors and processing payroll, it’s critical that you have controls and processes in place to avoid this happening to you.
In today’s video, I share simple practices and processes to help you avoid accounting fraud and stealing in your business.
My client, Bob, called saying, “I’m a little freaked out, and I need your help.” He continued, “I’ve been working my butt off to get my revenue up, but my bottom line profit is dropping.”
If you’ve ever experienced your revenue increasing, but your bottom line staying flat, or worst yet declining, then you can probably relate to why Bob was freaking out.
Making a consistent profit can be a common problem for many contractors, but it doesn’t have to be your problem.
When things like this happen, I tell clients to start with the data. Numbers always tell a story. So Bob and I sat down together armed the company’s profit and loss reports.
Sure enough, he was right. Revenue was steadily increasing, but the gross profit margin had been falling little by little from 30% a few years ago, to 27%, to 25% this year.
Contractors live and die by gross profit margin, so this decrease was worth a closer look.
If you’re working super hard, but you’re just not seeing the results you want, keep reading. I’ll explain to you why this happens, and then, what you can do to change it. We’re going to talk today about what causes gross profit margins to drop, how to avoid “overhead creep”, and how to price for increased profits.
When we had our first open house on March 15th and then were put under a “shelter in place order” on March 17th, I just assumed we’d be staying in California for at least another six months.
The universe had a different plan.
A week after our first open house, with no more showings, we got an offer that was exactly the price we said we’d be delighted with, so we took it.
While I anticipated moving across the country would be an adjustment, I never thought these past four months would play out as they have.
Those first two months were filled with a flurry of packing, and helping clients navigate PPP borrowing along with the many other changes they were instantly facing with regards to their teams, and their bottom line. I was grateful to be fully consumed with these projects as it barely allowed me to notice the fact that I couldn’t go anywhere or see anyone.
On May 16th my husband Tim and I flew from California to Kansas with our dog Nica, full of optimism and hope for finding and settling into a new home. Tim is originally from Kansas, so for him settling in was easy – this is home. For me, I instantly felt the press of being a stranger in a foreign land. Not wanting to succumb to feelings of sadness and loss as I felt the distance and isolation from everything I knew, I kept myself very busy with client work and finding a place to live.
In the back of my mind, I kept thinking to myself “it will all feel more “normal” and I’ll be more settled when we’re in our new house and I can set up my office.” And at the same time, I knew there was more to it.
The truth was, there was this sense of loss that went beyond leaving my office of 27 years or moving out of the state I’d lived in for 40 years. There was something else stirring in me.
It wasn’t until after we moved into our new home, all the boxes were unpacked, pictures hung, yard mowed, and the first pot of sauce and meatballs made (cooking is one of the ways I nest 😊) that I realized that unsettled feeling was not going away.
It was time to face it head-on…
Not sure how to get the client to sign that change order? Having a tough time getting that employee to work faster? This week I’m sharing an interview I did with Dominic Rubino about how to make having those conversations easier using a simple 4 step formula.
Following this formula will give you more comfort in implementing change, AND, it will give you resources for overcoming resistance to the changes you are implementing.
Dominic and I role-play a few great examples of how to navigate a conversation that could otherwise be riddled with conflict. One with a client about a change order, the other with an employee. As it played out both parties were feeling good about the results.
Last week I shared an interview I did on The Designer Show on how, as a contractor, you can stop being treated like a commodity and get in the driver’s seat in the sales process. This week, I’m doing a deeper dive into how to nail your sales process by including 4 key elements that will make all the difference.
When a customer first calls, one of the best things you can do is manage their expectations. From the very first phone call, let them know what your process is, and what they can expect in this first phase of getting to know one another and identify the scope of the project. This is where you begin to build trust and confidence, and have you stand out from the competition. This is where you begin to really drive the sales process.
Tip: When you’re done explaining your process, ask them if they are OK with that – then wait for an answer. People will say yes ninety-nine percent of the time. Getting agreement on things like presenting the bid in person or by Zoom or Skype is an essential piece of giving you a greater chance of actually closing a sale.
SCREEN FOR RIGHT FIT AND STOP WASTING YOUR TIME
Unfortunately, some clients might be “tire-kickers.” They aren’t necessarily really interested in doing business with you, and really can’t just be pushed aside. Ask questions in your initial conversations with a potential client that help you understand if they are a “right fit.” Are they just looking for a lowball price? This is something you’ll want to establish early on.
One of the best ways to ensure that a client is a good fit for your company is to start by setting a minimum size project you are willing to complete. If a job isn’t profitable, why do it?
Create a matrix that could be used to rate a potential project opportunity:
- Set a goal for the minimum size job you’ll take
- Define what makes for an acceptable location
- Identify if the timing works in your schedule
These are just a few examples, and you get the idea.
Tip: If the rating doesn’t meet your criteria, you politely say that you don’t think it’s a good fit and offer to refer to another contractor. The homeowner, by the way, is always grateful for the honesty. And it will save you precious time by not bidding a job that doesn’t meet your requirements.
ASK POWERFUL QUESTIONS THAT MAKE YOU THE PREFERRED CONTRACTOR
Knowing how to ask questions is the cornerstone of a good sales process. When you take the time to truly understand a prospect’s needs by asking the right questions, you will understand what they value most and ultimately be able to provide superior value and experience. You’ll be able to stand out from the competition and be known as a trusted resource to your prospects and clients.
In my Sales Process Toolkit, I give you examples of some powerful questions you can ask at each stage of the sales process.
Tip: When you begin following a more ‘scripted’ process, it will no doubt feel clunky and awkward. That’s the way it is for most of us when learning a new habit. You’ll likely find that you’ll need to change up the questions to better fit your communication styles. Before long, however, the process will begin to feel natural. You’ll become consistent. You’ll start getting better information from the customer.
KEEP YOUR AGREEMENTS – YOUR MOST POWERFUL TOOL
Keeping your word, doing what you say you’ll do when you say you’ll do it, is the foundation of your reputation and identity as a contractor. In an industry riddled with dishonesty and subterfuge, you want to be known as someone who can be trusted.
Tip: If you do nothing else I’ve shared with you here other than this one thing, you’ll increase your close rate, and you’ll have people clamoring at your door to work with you. You’ll get tons of referrals from happy clients; and you’ll stand heads above the competition.
IT’S ALL ABOUT CLARITY…
Clarity breeds confidence, and confidence lets us take more powerful actions. This applies to you AND your customers. When you’re clear—whether clarity takes the form of knowing the customer’s pain, challenges, needs, and desires, or knowing the clear scope and budget—it’s easier to take control of the process because you’ll know what you’re doing. Having a solid sales process will let you do just that.
p.s. Using the tips I’ve shared above and using my Sales Process Toolkit will have you closing more of the RIGHT jobs.
p.p.s. If you want to learn more about making a consistent profit and increase cash flow in your business, then check out my book, “The Profit Bleed – how managing margin can save your contracting business.”
In a world that generally treats contractors like a commodity, how can you get treated with the respect you deserve?
In an interview I did last week with Dan Bauman of The Designer Show, I shared…
• How to shift the focus so your driving sales interactions
• How to stand out from the competition with a written Sales Process (I’ve shared my template for this below)
• How to get the respect you deserve, and stop being treated like a commodity
• And finally, how to close more deals with the RIGHT customers
As you watch this week’s video you’ll not only gain insights into how to stop being treated like a commodity and get into the driver’s seat in the sales process but also how to quickly build more trust with prospects and gain their respect.
In this video (and in the outline I share below) I show you how to craft a Sales Process that will allow you to do all that, AND, close more sales with the right customers.
You download my Sales Process Toolkit (PDF) and start driving the sales interactions.
Dan mentions my book, The Profit Bleed, in the video (thank you Dan!) – if you’d like a copy, you can order yours here.
“Listen, we were bidding like crazy before we lowered our prices and weren’t closing enough work. Now that you’re telling us to raise our prices, I’m concerned I’m going to have to go back to bidding twice as much work just to get the same number of projects.”
In my experience helping construction companies close more sales and increase profit margins, the above statement is not unique. It can simply become difficult for business owners to wrap their minds around the idea that raising prices can actually help land more contracts. The sales process is multi-faceted and about much more than just the price.
Construction companies should strive to be different and see pricing wars as not a strategy for landing the next job, but rather an opportunity to deliver a great experience and value to customers. Unfortunately, playing the pricing game can be a downward spiral that leads many construction companies to price themselves out of business. Consumers become accustomed to paying such a low price that it almost becomes a demand and causes business owners to ultimately scramble to survive. They are forced to keep their prices at a point where they are actually losing money.
It was a simple question… “How’s your year going?” As I watched his expression change and heard the strain in Bob’s voice as he spoke, the angst was palpable.
“Nearly a whole month of not being able to work on projects, and a slow start back, with unexpected setbacks dictated by circumstances out of my control, has taken its toll,” he said slowly. His eyes reflected defeat. As we talked it was evident Bob felt a lack of control in his business.
Almost every business owner I’ve talked with over the past two months can relate to this experience at some level. (more…)
Running a business is never easy. Just thinking about all the necessary elements of a successful company can become overwhelming. That said, becoming a profitable business shouldn’t be an overly complex or stressful experience. In the contracting industry, far too many companies make a critical mistake which only perpetuates this stress. When it comes to truly becoming profitable as a contractor, there is no substitute for the value of understanding the critical elements of your business. In my book, The Profit Bleed, I make it my goal to help contractors understand a handful of key numbers which can make or break their business. If you are tired of being perpetually exhausted and spend day after day stressing over a lack of adequate cash flow or organizational tension, numbers may be the solution.
Can you relate?
Your Balance Sheet is a powerful management tool if you know how to read and interpret what the numbers are telling you. In fact – two key numbers. Just like having the right tools when working on a project can help you produce better results, the same is true of your company’s financial reports.
What kind of results? Sufficient cash in the bank when you need and want it. Cash reserves on hand when unexpected events occur – like a pandemic or downturn in the economy. While no one could have predicted a pandemic, the clients I work with who have cash reserves did and will continue to fair much better during this time than those who didn’t.
In this week’s video, I walk you through how to read and use your Balance Sheet as a powerful management tool. I show you the 2 most important numbers to look at that will let you keep your finger on the pulse of your company’s financial health. In the process, you’ll learn what targets successful contractors use in their business to manage these numbers.