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.
Are you regularly checking your business’ vital signs?
See, to me, there are a few key numbers in your business. They act as an impartial, unbiased review of what’s going on in your business. They can tell you if there are problems, unmet quota, faulty systems and more.
They are, in essence, the vital signs – such as the heartbeat – of your business.
Today, I’d like to go over a few of these key numbers. Allowing you to get into the heart of your business and see just how well it’s actually beating. As well as potentially highlighting some issues that may be holding your business back.
What’s more, you don’t even have to be an accountant to make use of these numbers. Pretty exciting, right? So, without further ado, let’s get into these numbers and how to monitor them.
1, 2 and 3. Revenue, Gross Profit Margin and Net Profit Goals.
The reality is, most businesses have clear revenue goals.
However, they’re not always great at keeping track of gross profit margin or net profit goals. Which is like checking for a pulse without checking for breathing. They go hand-in-hand. The success of revenue, margin and net profit goals are all intertwined.
Do you wish your staff took more responsibility in their job?
For a number of years, I’ve worked with business owners and managers struggling with teams not taking ownership and responsibility. Many of them are left dreaming about it rather than believing it to be possible, and many think it’s the key issue holding back their business growth.
In my early days as a manager and business owner, I struggled with these same challenges. And I saw that if I didn’t do something different, my business would never grow. That wasn’t going to work for me – so I started researching what might be behind this phenomenon.
That research set me on a course of deep learning from some of the great thought leaders on the topic of management and leadership.
In the years since, I’ve been developing and implementing systems that have not only helped me, but helped hundreds of other business owners and managers as well. The results? People started taking ownership of their jobs. And that wishful dream became a reality.
Now, I’m going to share that system with you.
Back in the early years of my business I was struggling.
Not from a lack of direction, workload or help either. It was all there in abundance. I had a clear idea of what I wanted to achieve. And I had clear goals for my team as well.
But, no matter what I did, these goals were frustratingly not being met by my team.
And according to a recent survey I did, 77% of the respondents are feeling exactly how I did. They’re struggling with the same obstacle. Their teams not taking ownership in their jobs.
They’re trapped feeling like they need to micromanage their staff to get anything done.
This feeling had caused me a great deal of stress over the years, even before I’d started out in my own business. Despite several leadership courses and books I’d digested on the topic.
It was when I was faced with unhappy clients that were about to leave, that I knew I had to do something different. I needed to learn how to motivate my team.
That started me looking to the great thought leaders on the topic of management and leadership. The first few were Michael Gerber and his book The E-Myth, and Dan Pink’s talk on Motivation.
In this post I’m going to share the two key lessons I learned that have been the cornerstone of my own transformation as a manager and leader.
1. Successful Leaders Don’t Micromanage
This was the first realization that transformed how I motivated my team.
In Michael Gerber’s book, which I read several times as I stood face-to-face with the prospect of losing my business, he made a clear distinction that revolutionized how I led my team.
I could no longer be a micromanager for the results my staff were meant to be achieving.
I needed to delegate the business’ workload and know – with confidence – that the work was going to be done. Correctly. Without me having to step in and fix it every single time.
Otherwise there’d be no point in me delegating. And there would be no weight taken off my shoulders. I’d still be working a job, instead of running a business.