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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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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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Systems for Increased Profits

It was 2005, the economy was booming, and my appointment calendar was full nearly every day.  I was grateful for the abundance of work, but at the same time, I was weary.  I’d been working non-stop for two years and longed to work fewer hours. “Teach a course!” my business coach suggested cheerily.  “That way you can work with “one-on-many” vs. just “one-on-one”, then you could cut down on your hours.”

The thought of developing a course when I was already working so many hours sounded daunting and exhausting.  For several months I kept objecting and explaining all the reasons why it wouldn’t work.  But she didn’t give up and each time I complained about working too many hours, she would remind me that I had other options.

In late 2005, tired of hearing myself complain, I relented and agreed to build the course. In the 1st quarter of 2006, the first Business Boot Camp course was launched.  A course designed to help contractors create better systems for increased profits. As I wrote each new lesson plan it made me stop and think through what I do with clients when working one-on-one.  As I wrote and then taught each session, the most amazing thing happened in my business…

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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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