Get Ready for 2018 by Finding Ways to Increase Your Company’s Profits
You’d be hard pressed to find a contractor that didn’t want to find a way to make more money next year. What’s harder to find is a plan that’s going to result in more jobs and higher profits. If you want to increase your bottom line next year, then you want to stick around and find out exactly how to do that.
Outdated marketing plans are just that: Outdated
The bottom line is that the three-prong approach that used to work no longer works. We’re talking about companies that focus first on getting more sales, then on more jobs, and then on more work. This isn’t effective for one simple reason: It doesn’t mean higher profits.
Think of it like this. If you spend make $100 but spend $99 to get that $100, then you’re not making much at all. On the other hand, if you’re making $100 and only spending $20 to get it, then you’re making more money. This is why some contractors need to stop focusing so much on getting more jobs and start focusing on getting jobs that come with a higher profit.
Start by setting profit margin goals
The first step is to sit down and set profit margin goals. You don’t want this to be general, you want one for each of your revenue streams. For example, you could have three goals, one for water, one for mold, and one for construction.
Next, you need a job costing system that’s going to help you track your success. As one example, consider that any water mitigation work you do should result in about 75% profit or more. On the other hand, build back services are considered in a good range if you’re making 50% profit. Once you’ve created this job costing system, it will be easy to see if you’re hitting your goals.
Increase job profit by increasing your buying power
If you want to make more money doing the job you’re already doing then you’ll need to find a way to lower your costs. A simple answer is to make large material purchase from wholesale companies. If you buy in bulk, you could save as much as 50% on some high-price materials, like flooring. This requires an investment but can pay off quickly.
Stop renting a pressure washer
Some companies just getting into the construction game assume that they don’t need to have a pressure washer. After all, this is a relatively high investment piece of equipment and how often will it really be used?
There are two things to consider here. First of all, if you buy a machine then every single time you use it, you’ll be saving money compared to what you would have paid to rent it. On the other hand, if you have to rent each and every time, then you’re adding costs for no reason. Second, consider how much more you’d use it if you had it. Why pay three laborers for two hours of cleanup when you could have one of them get it done in thirty minutes with a hot water pressure washer?
