Business Builders Blog

Category: Get Confident in Your Numbers

How to Nail Profits in the Bid Stage

Contractors live and die by gross profit margin.  And if you don’t learn how to control that one element in the bidding stage, you will always be chasing after profits.

The contractors I know who have learned to manage gross margin when bidding, nail project profits right from the start, and the result is a construction business that produces a consistent profit.

Gross profit dollars vs. gross profit margin:

Gross profit dollars are the difference between your bid price and your project costs. Often I see that contractors only look at that number before a bid goes out.

The gross profit margin is your rate of return and is measured as a percentage.  It’s that percentage that you want to learn to manage in the bidding stage in order to make a more consistent profit in your business.

So how do you manage gross profit margin? In the video and the post below I show you how.

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Knowing this ONE number can increase your profits

In over 25 years of working with contractors, there is one number that a lot of folks I meet don’t understand – and getting that one number wrong is killing their profits!

What sparked this post was a recent call with Joe – a remodeling contractor. We were barely on the phone for two minutes, when Joe launched into a rant about how he felt he’d been doing all the right things in his business, and yet, his bottom line and bank account were not showing the return for all his hard work!

Maybe you’ve been there too at some point?  It’s super frustrating.

Making a profit begins with the markups in your bid

When I asked Joe his strategy for marking up his costs in bidding he replied – “I mark up what I think I can get. I mark up according to what I hear other contractors in my area are marking up, like 10% and 5%, or 15% and 10% on some projects.”

This was part of Joe’s problem.  I explained to Joe that unless you have a large company, your overhead percentage is never that low.  I know this because in the past 25 years I’ve worked with hundreds of small to mid-sized contractors, and I see their numbers.

I could see the irritated look on Joe’s face as I spoke.  “Well, then how the hell do people who only mark up that much on their bids make any money? And how am I supposed to compete against those guys?”

As I asked Joe more questions, I could see he was not clear on the one number I knew was a factor in how he priced his work, and ultimately in the profits, he was or was not making.

Watch today’s video and learn what Joe and I figured out in his business that allowed him to start being more strategic in his bidding, and let him start adding more profits to his bottom line.  You can also read more below.

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Control Your Business So It Doesn’t Control You

When business is moving fast, and you’re working hard to just keep up, it can feel like you are not in control.  But you don’t want to drop any balls that your juggling.  Because if you do, it may actually get worse. 

While it can feel like that is your only choice, I’m here to tell you  – there IS something you can do to have more control, that doesn’t involve you just working hard, or more hours.

The one thing that always gives us more control is information. Information gives us…

Clarity so we can have…
More Confidences, so we can take…
Powerful actions

Today’s video is an interview I did with Devon Tilly, host of the podcast, Art of Construction.  In this interview, Devon starts out by asking me…

“How do you see contractors are being controlled by their business?” – what a great question!

As you watch and listen, here are a few questions to ask yourself…

What DO I know and how can I get even more clarity?
How CAN I plan for the unknown?
What choices DO I have now?

Enjoy!

Warmest,

 

Vicki Suiter helps people see their businesses differently, then gives them the tools to do things differently.  Since beginning her business in 1990, Vicki has helped hundreds of contractors achieve the kind of success they never dreamed possible. Today, in addition to consulting, Vicki is an in-demand speaker at industry conferences nationally and internationally. Vicki’s articles and opinions have been widely shared in print and across the web. She is also the author of the book “The Profit Bleed” How managing margin can save your contracting business.

Just 3 Things to Always Make a Profit

Contractors learn how to get control over your business and start increasing profits, working less hours, and having more fun. In this video, I walk you through the key areas where profits are made and lost in a contracting business, and how to identify for yourself what to focus on to start improving profits, and ultimately work less and love what you do again.

Warmest,

 

p.s. If you find this video helpful, you might want to check out my book, The Profit Bleed.  For a limited time, it’s FREE – you just pay shipping and handling.

Vicki Suiter helps people see their businesses differently, then gives them the tools to do things differently.  Since beginning her business in 1990, Vicki has helped hundreds of companies achieve the kind of success they never dreamed possible. Today, in addition to consulting, Vicki is an in-demand speaker at industry conferences nationally and internationally. Vicki’s articles and opinions have been widely shared in print and across the web. She is also the author of the book “The Profit Bleed” How managing margin can save your contracting business.

Planning for Profits – Your Company’s Budget

Imagine it’s December 2020, and you’re reviewing the results of your business for the past year and you notice that compared to 2019, your profits are WAY up, AND, you didn’t have to kill yourself to make it happen! How great will that be?!

That’s what’s possible when you operate your business with a plan. Planning for increased profits by creating an operating budget for your business. I don’t just mean a revenue plan (most people have one of those), I mean planning for bottom-line net profits and increased cash flow. In today’s video, I’m going to share with you the tools and steps to employ to help you do just that for your business!

Before I jump in, let me ask you a question. Are you one of those people who thinks that doing budgets for your company is a waste of time? Maybe you feel like you never meet your goals, so why bother. Or maybe you feel like it’s restrictive and limiting, and you want to have freedom and choices about what you do with your money?

It doesn’t have to be that way when budgeting is approached with the right mindset. In fact, it can be the most empowering and liberating thing you’ve ever done for your business! It’s just like preparing an estimate on a project. When you bid a job you:

  • Get intentional in figuring out what it’s going to take to complete the work
  • You determine what it’s going to costs
  • You build in mark-ups to generate a profit
  • You figure out how to do the work within a budget
  • Then you track your results agains the budget to help you stay on track

It’s just like that when builidng an operating budget for your company, and then tracking your results to make sure it happens.

When you use that same approach to budgeting for your whole business, you can create much more profit for your business, and have cash in the bank when you need it. And just like projects, you have more clarity about that it’s going to take to have it turn out.

Being intentional about planning for profits using an operating budget will give you…

  • Money to invest back in your business, which will stimulate growth.
  • The ability to offer profit sharing with your employees or offer generous bonuses.
  • Cash to pay off debt.
  • Cash on hand to accommodate unexpected events or slow receivable payments.
  • More money to pay out distributions to YOU

Thinking beyond just revenue, and setting goals for gross profit margin, net profit, and cash reserves, and YOUR paycheck, you begin building a plan for profits that gives you the roadmap for getting from where you are now to where you want to be.

This post and the accompanying video will go in depth on how to set goals for your company and then how to set an operating budget to support those goals. I’m going to walk you through a goal worksheet that’s a great starting point, and then dig into how to develop an operating budget for your business.

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Planning for Profits – Be Intentional About Your Money

image with coins in the background and the words How intentional spending can change your life for the better!

It was a huge wakeup call for me when one day I was faced with needing to buy a new set of tires I desperately needed for my car, and no money in the bank or available credit to buy them. The realization set in that my habit of living from paycheck to paycheck was not workable.

The story of, “When I make more money, I’ll have more money,” was a lie.   Because every time I got raises and my salary went up, I still never seemed to have any extra money for unexpected expenses.

Being in my mid-20’s at the time, and starting to look at not just surviving, but actually wanting to buy a house some day, I knew something had to change.

It was while channel surfing one Saturday morning that i stumbled upon the Suze Orman Show and her voice blared at me “your problem with not having enough money isn’t really about not making enough money, it has to do with the fact that your not being intentional with how you spend your money.”  I immediate stopped changing the chanel, and started to pay close attention.

That wake up call, and her books and courses completely transformed my relationship with money and began to show me the principles of how to always make a great profit and have money in the bank when I want and need it.

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