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Business Builders Blog

The Story Your Numbers Tell

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.

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Clarity + Confidence = Control

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…)

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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Pricing for Profits: The Story Your Numbers Tell

Stephen Few quote:

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.

Read More

Doing this 1 thing can help alleviate your worry…

As Don sat down across from me the worry and angst on his face was palpable.  “What’s up?” I asked?

“I know we’re in better shape at the beginning of this year than we were last year at this time, but I’m worried that it’s not enough.  I’m concerned that the economy is going to turn, and we won’t have enough work.”

I can relate.  We’re all wondering when the economy is going to take a turn. And none of us have a crystal ball that will tell us that.

But what we do have is data.  Data that can help us alleviate at least some of that uncertainty and worry.

I asked Don if he knew how much his backlog was as of the beginning of the year.  “No” he explained, “we have just been pushing to get as much work done as we could by year-end to meet schedule deadlines, and we’re trying to ramp up bidding right now.”

With all the balls we must juggle as business owners, it can be difficult to take the time to stop and look at the data.  And yet, it is exactly that which will allow us to get more clarity, focus, and certainty about what we need to be doing to “have it all turn out okay.”

Finding relief in the numbers        

Looking at the data will let you move from worry and uncertainty, to have certainty and focus on what actions you need to take.

I asked Don if he could easily access this information, and could we look at it together. He said yes, and as we started to dig into his project reports we pulled out the following information…

               The balance remaining on contracts at 12/31/18.  I asked him to include T&M projects and an estimated amount that he would bill for the balance of the project.

               Value of contracts on projects signed, and not yet started

With this data in hand, we spread out over 12 months the amount he projected to bill on each project by month.  I suggested he be conservative.

Then we took his revenue goal for the year and split that out by month, taking into accounts fluctuations of when he is busier or slower.

We then tallied up the amount he projected to bill each month in total and compared that to his revenue goal by month. 

This allowed Don to see exactly how much he was short or over per month and for the year to meet his revenue goals. 

As we reviewed the data, Don’s face began to soften, and the look of worry faded from his face. 

He suddenly smiled and said “wow, that’s the biggest backlog I’ve ever had at one time! And while I’m a little freaked out by the fact that I have that much more to sell this year, I now can at least see exactly how much that is!”

When you can see it, you can do something about it

 

In today’s video I walk you through how to use this kind of tracking tool and give you a link to a worksheet I’ve developed that you can use right now to develop your own backlog tracking worksheet.

As I told Don, and I’d recommend for you, if you want to have more peace of mind and alleviate the worry of whether your going to make it, update this spreadsheet every month.

Even if the numbers don’t show a picture you want to see, it will at least let you get clear on how much of a gap exists between where you are and where you want to be, so you will know definitively how much you still need to sell.

Hope you find this information helpful. 

Warmest,

 

______________________

p.s.  Get my Backlog Tracking Tool at no charge, and start having a greater sense of clarity and stop the worry!

p.p.s.  If you found this article helpful, please share it with an associate or friend?

p.p.p.s.  In my book, The Profit Bleed, I talk in more depth about other ways you can get more peace of mind and stop worrying.  AND start having more control over the results of your business.  For a limited time, it’s available for FREE, so check it out.

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.

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