$200k in profit. 2 paths…
Path 1: Doing 38 Jobs a month.
Path 2: Doing 50 jobs a month.
Which would you rather?
The 38 jobs, right?
It’s the same outcome, but an easier path.
But HOW…
Well, it all comes down to Profit Margin.
Let me explain:
If your profit goal is 200k, fixed costs are 250K, average sale is 2500.
Then with a 40% margin you’ll hit that profit goal with 38 jobs a month.
If that margin drops to 30%, to hit the same profit goal with the same fixed costs and average sale, you’ll need to do 50 jobs a month.
This is a calculation that shows how much your workload would need to increase to make the same amount of profit if you were to drop your prices.
For example, if your margin is 40% and you dropped your price by 10%, your sales would need to increase by 33% to make the same amount of profit.
But it doesn’t stop there.
33% more work means…
- You’ll need 33% more tradesperson time, so you might need to hire more tradespeople.
- You’ll need to do 33% more scheduling, so you might need to hire Office Support, there’s another wage to pay.
- You’ll need to do 33% more pricing, now you’re looking for an Estimator which is another wage.
Unless of course you want to do the extra work yourself.
You’ll need to find that 33% more work, which means spending more on marketing or generating more job requests.
That isn’t easy or cheap either.
So if you’re thinking about dropping your prices or your margin, maybe things have been stressful and chaotic lately…
Then have a think about the impact your pricing and margin is having on your business.
If you want to calculate the exact number of jobs you need to do to hit your desired profit goal click here to head over to the Free Resources page and download the Planning for Profit Calculator.