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In order for any business to be profitable they must totally understand these three basic steps...
HOW TO MAKE MORE MONEY IN YOUR BUSINESS- START BY UNDERSTANDING YOUR NUMBERS
Step #1 Completely understand the cost of doing business.
Establish overhead.
Step #2 Accurately estimate, bid, or price your work.
Step #3 Get a higher profit margin for your work.
"The Biggest Temptation is to Settle for Too Little."
―Thomas Merton
Step #1
ESTABLISHING OVERHEAD
Most contractors' pricing structure is far too low to generate long-term profits for their business to grow from. Understand that overhead is not profit. Until overhead is satisfied, there are no profits; you are just trading dollars. In order to expand your business into a more profitable company, you must first understand and apply the principles of establishing a true cost of doing business: you're overhead. Your break-even point.
Following is information to help you establish what the overhead is for your company. Please do not skip this part, it is very important and the results may surprise you. Be sure to include a salary for yourself, someday you may want to hire someone to do your job or function in the company. Also, in most small businesses the owner is the last one to be paid. So don't shoot yourself in the foot, make sure your fair share is included!
The goal in establishing overhead is for you to completely understand what to figure into each bid in order to be able to support you and your company. These figures and percentages will be used in calculating the costs on all of your jobs.
To establish your overhead-make a list of all your costs associated with doing business.
Take your present yearly volume dollar amount (or even an estimate.) Now, take the dollar amount of your cost of doing business and divide it by the yearly volume.
For example:
$80,000 (yearly overhead) - divided by - $500,000 (yearly volume) = 0.16
You have a 16% overhead factor. That's break even.
Step #2
ACCURATELY BID YOUR WORK
An estimating form is included in our program, which will allow you to do this with some slight modifications for your trade. This simple estimating system can be used in most trades. The system is so dirt simple, back to the basics, that I am sure you are aware of and are probably doing it now. Estimating is not an exact science, but better accuracy can be obtained by the simple process that we call "estimating in pieces."
THE PIECES
Labor
Materials
Miscellaneous
Overhead
Profit
Understand that all trades and businesses are unique. Therefore, you may need to modify this system to fit your business. We do not want to try to reinvent the wheel. Our desire is to assist you in making it roll along smoother. So do what works for you. Estimating is the fine art of "guess-timation." A guess is much easier and more accurate if it's broken down into pieces.
Step #3
GET A HIGHER PROFIT FOR YOUR WORK
Most contractors constantly tell me how busy they are. My question is... are they making too much money? NO!
Focus on profits, NOT on activity.
Most contractors
The key is...
Be expensive! - Did you know that Mercedes outsells Hyundai 12 to 1?
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