“After back costing our jobs we found out we were losing money on our ‘best’ client making 19-21 trips to simple house builds! We’ve changed our processes and improved our gross margin from 18% to now making 36% – 38%. We now price work to make money rather than to just get the job. We now have a strong management team in place including an Operations Manager, Office Manager, and Pricing Manager so I can work on the business. Sales have grown by $1.6 million and we’ve taken on 6 new tradesmen.”
Mark Watkins – Advanced Plumbing
Gross Margin Analysis
Are you pricing with sufficient “fat” in your jobs to cover your fixed costs and leave a decent profit to you? Have you got a target gross margin for each type of job? Or do you simply use a “mark-up” on your costs?
Monthly Profit and Loss
Do you run a monthly Profit and Loss Statement and compare this to your monthly budget? Your Profit and Loss will tell you whether you’re making money in real time rather than waiting 12 months till your accountant gives you the good (or bad) news.
Cash Flow Management
Have you struggled to pay wages, merchants or the taxman even though you think there is plenty of fat in your jobs? Plenty of good Plumbers or Sparkies fail due to poor cash flow. A weekly Cash Flow Forecast (a prediction of your bank balance) is an essential tool for Tradies who want to sleep well at night!
Do you track budgeted costs throughout your large jobs? Can you tell if you are on track? Can you see the consequences of variations to your projected job profit? Without accurate and timely project reporting you run the risk of budget blowouts. And early information gives you the chance to drive the guys hard to pull the project back and keep on track.
Key Performance Indicators
Do you have a set of key numbers that you check at least monthly to ensure your business is on track? KPI’s give you an early warning of what areas in your business you need to address. Examples of KPI’s include monthly sales, Gross Profit Margin, the number of new leads, conversion rate, on-site productivity, labour utilisation and client satisfaction.
Do you have pricing templates and use set or unit prices to streamline your pricing and invoicing process? Can your team give clients a price on the spot? Do you check that all charge-up invoices are hitting your target margins prior to sending?
Accounts Receivable Process
Have you got the right Terms of Trade and are you getting them signed by your clients. Do you have a written process to collect payment from clients including following scripts and letters and debt collection? Getting paid is the number one rule in business and slow payers are one of the main stress points for Plumbers and Electricians.
What are the next steps?
Are you a Plumber, Electrician, Gasfitter or Drainlayer that needs more profit, time and freedom?
Simply get in touch with the team today by calling (07) 859 3425 or fill in the form below
Profitable Tradie teaches great plumbers, electricians, gas fitters and drain layers how to become great business owners.
Formerly operating as Plumbers Coach our clients have implemented proven strategies (tested with over 218 Plumbing and Trade Business Clients since June 2008) to solve the three big challenges: Working too hard, team hassles and wanting more profit.