Do You Plan or Hope for Profits?
authors Shawn McCadden | December 10, 2018
Some people have a way of getting their point or message across in very few words. I think Walter F. Abbott did so with this simple but thought-provoking quote: “Business without profit is not a business any more than a pickle is candy.”
So if you claim to have a business, but you are not turning a profit—especially in this economy—please tell me, then, why you call it a business? As I have indicated in recent columns, knowing what to charge so your business earns a profit is sixth-grade math. Once you know what your financial goals and requirements are, you must think and act as a real business manager to make sure what needs to happen does happen. If you are trying to turn things around, first look back at recent issues of this magazine for how the financial side of a remodeling business works. Figure out your key numbers and set measurable goals. Then, if you have done that, you can take advantage of the advice I will share in the rest of this month’s column.
It’s not just about how hard you work.
It’s a given that business owners work hard. But working hard isn’t enough to guarantee a profit. You must also work smart. For example, will you wait to see which job leads you get, then as a result complain that working outside in the bitter cold killed your profits? Or will you do strategic marketing to attract indoor projects for the winter—with lots of materials and subs to markup—and therefore much more efficiently generate the gross profit your budget tells you is needed to earn a 10 percent net profit in 2019? Also, if you need to raise your prices and your volume to earn a planned profit, perhaps formal sales training for you and your sales staff would make that more likely. The right sales training and system can increase your closing ratio and your margins. That would be much smarter and more effective than assuming to just go out on more leads. The sales training is a significant investment but, if it helps you increase your close ratio as well as your sales volume, it can quickly pay for itself. Again, think about working smart, not just hard.
Being busy is not necessarily a good way to measure success.
Many remodelers share with me their desire to make sure they have the work they need to keep their employees busy. On one hand, this is admirable because it shows an assumed responsibility to those employees and the earnings they and their families count on. On the other hand, as a business owner, I suggest your first responsibility is to make sure your business earns a profit. Profit should be the priority because without profit, the business will eventually fail. If it does, your competition and their employees will be busy, and your employees will be looking for new jobs—perhaps with your competitor. That certainly would taste more like a sour pickle than your favorite candy.
I also have observed that many remodelers, when asked how their business is doing, respond with something like, “We are really busy.” Although that answer may be true, do you use it because you don’t know if you and your business is (or will be) profitable? And if you have no idea whether or how to make sure your business will earn a profit in 2019, do you really have a business? Or are you just in a pickle?
Would you hire you to run your business?
You may be the owner of your business, but are you really the right person to be managing it? Consider this: If history shows you have not been able to earn a respectable profit at your business in a consistent way year-to-year, would you hire yourself to run your business? If you were looking to step aside and hire a general manager, which skills would you want to see on that person’s resume? What accomplishments would you need to see on that resume? Would you expect the candidate’s resume to be different than what would be on your resume? Be honest.
A good carpenter works both hard and smart. But a good carpenter might not have the knowledge and experience to properly lead and manage a profitable business. If you are a better carpenter than a business owner, a good first step would be to recognize this reality. Once you do, then one option could be to get the help, training and mentoring you need to become the right business owner for your business. Or you could seek out a manager with the right resume, put them in charge of earning a planned profit, and go back to doing what you are good at and like to do. Wouldn’t that taste sweet? |QR