The one report I see most business owners don’t look at very often, if ever, is their balance sheet. The bummer is this – that means they don’ know two of the most important numbers that will help them grow a successful company.
It’s not because their lazy, or don’t care. Mostly it’s because they don’t know how to interpret what it says, or how to use it.
Is this true for you too?
In this week’s video, I show you what those two numbers are, and how to use them to build a stronger, more profitable business.
Do you ever feel stuck by not knowing the best way to structure year-end bonuses for your team?
Do you wish you knew what other people were doing?
Since I get this question a lot, I decided to focus this week’s blog on different ways to structure year-end bonuses.
I had the most interesting experience last month being a guest on my friend Kyle Hunt’s podcast, Remodelers on the Rise.
I came prepared to talk about pricing for profit and ready to answer the questions we’d outlined ahead of time. But right from the get-go, Kyle went off script. At first, I was concerned and thought “where is he going with these questions?”
He’d make these funny comments, or intersperse a light-hearted observation while I’d be making a point, which threw me off a bit.
Contractors I know who do this one thing when bidding make more consistent profits on their projects and their bottom line.
Before I jump into telling you what that one thing is, it’s important to understand this . . .
In over 25 years of working with contractors, there is one number that most people I meet don’t know. And getting that one number wrong is killing their profits!
What sparked this post was a recent call with my new client Joe.
When my client Bob first called me and I asked what was the number one thing he’d like to change in his business and he replied – “I’m bidding at all hours of the night and weekends, and then working in the field during the day. I feel like I jump through hoops to try and give prospect what they want, and it takes forever to get them to commit if they commit at all. I want to find a way to get more control of this part of my business, and stop working nights and weekends.”
I told Bob he wasn’t alone. If there is one thing most contractors can agree on it’s this: selling is not at the top of the list of things they love to do. I can understand this since selling is not usually where your greatest strengths lie. It can feel unnatural and awkward and often leave you feeling like you’re wasting precious time trying to get someone to make a decision, especially when you’re competitively bidding against other contractors.
So how do you stop wasting time bidding the wrong jobs, get control over the sales process, have people commit faster, AND, have you be the preferred contractor?
Good news – it’s not as complicated as you may think.
We all want to be successful; it’s part of being human. We want to be better at what we do, particularly when it comes to our business; whether that’s increasing revenue, implementing better processes, improving how we hire, or perfecting a skill. Finding success and getting what you want is often attached to making a change or improving in some way.
We start, then we put it down. We put it on our to-do list, and then it sits there. We put in a stack on our desk and assign a due date, and then it sits. Undone. Incomplete. Nagging at the back of our minds, “gosh I really need to …”
Making a decent profit starts with bidding. There are a couple of bidding pitfalls that, if you’re not alert to them, will negatively impact your bottom line, and will render your powerless to protect your profits once in production.
1 ) Not using the most up-to-date figures for the cost of employees (everyone is paying more for employees these days).
2) Not using the correct overhead markup percentage (many people get this wrong). See my post of May 17, 2018, for more on this.
3) And, if you don’t understand the difference between markup and margin, your profits will start to bleed before a project even begins.
In this post, I want to focus on #3 – Markup vs. Margin.
Markup vs. Margin
A surprising percentage of contractors and business owners will confuse markup and margin. Each figure helps you set prices and measure productivity but, a margin vs. markup chart shows that the two terms reflect profit very differently. It’s important to know the difference between margin and markups in your pricing because when you don’t you can mistakenly price yourself too low.
Let’s face it, everyone strives to attain profitability. We seek abundance, prosperity, options. We want financial stability, success, and freedom. There’s absolutely no shame in that. When we own a business, we focus on providing great service, building a remarkable reputation, which in turn, should lead to a strong client base, and a highly profitable business, at least in theory.
Yet, time and time again, businesses run into walls. Despite the best of intentions and all that hard work, their income is barely covering overhead costs. I see it all the time.
In hopes of reaching a higher profit, they end up taking on more work, chasing after anything they can get their hands on, which leads them into a vicious cycle. Seemingly overnight, they’re giving up weekends; abandoning their own health, relationships, and happiness in exchange for endless coffee sipping and yet another late night at the office.
Sound familiar? read more…
Guest blog by Sonja Stetzler, MA, CPC
I met Sonja a little over a year ago, and when she told me about her use of improvisation in the workplace I was fascinated. How is that possible I thought – it’s just that silly stuff they do on Whose Line is it Anyway.
As Sonja explained more, I realized it is so much more than that. And as someone who cares deeply about creating cultures where people can win together and create great results, I wanted to learn more. The next month I took an improv class.
In doing so I found that the principles of improv really do apply to creating great work environments. That led me to ask Sonja to write this blog post. I found what she said to be spot on with my experience in working with teams. Hope you find her message to be valuable too.