I have been asking contractors lately, “How did you do in 2015?” A couple have given me specific answers like:
- “Great. We raised our gross profit 13%”
- “It was rough. We grew sales by $100k but profit by only $5k.”
I’m good with these guys because they know how they did. What I can’t handle is when I ask the question and I hear….
“I’m not sure. I just sent my accountant everything, so I should know in a few weeks.”
This is ridiculous. And it’s irresponsible.
Imagine 2 teams playing a game and not keeping score.
“How’d you guys do last night?”
“Not sure. We need to wait until the season is over to find out.”
Out of the kindness of my heart, I have decided to share a few things you can do to make sure that you’re not one of those contractors who has no clue how he did. Here we go:
You own the contracting business, right? That means you own everything that comes with it. Your accountant and bookkeeper both play huge roles, but you’re the one who is responsible for how the company performs. Get you head right now and decide to be involved each week in your financial health.
Create Thoughtful Job Estimates
Take the time to think through every step of the job. List the man-hours. List the materials. Figure up the costs.
Stop licking your finger and holding it up in the air to figure out your sale price.
Multiply your costs by at least 2 and sell it at that number. Then…
Perform Job Costing on Each Project
After the job is done compare the time it took to the hours you estimated. Check what you spent on materials with what you thought you would. Total those numbers up and then subtract it from the sale price. This will give you a Gross Profit number. This is the most important number in a contracting business because of how quickly you can impact the bottom line.
Have a Weekly Call with Your Bookkeeper
Get on the horn for 30 minutes and look at the numbers. Go over the Profit & Loss sheets. A good bookkeeper like mine, Gina Malvestuto…will make sure invoices are sent, money is collected and things like quarterly taxes are paid. There are days when I think Gina should change her name to Guido and carry a tire iron….a good bookkeeper will keep you in line. If yours doesn’t, get a new one. I’ve worked with Gina for over 13 years.
Taking time to do these few simple things will keep you in the loop with the financial health of your business. It will also give you a chance to make course corrections throughout the year so you don’t have a bad year.
In the end, you should never be surprised by how you did the year before. If you’d like help getting your business in order with systems to help you ensure your always do well let’s talk. Just click the button below.
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