 Chuck Bowen |
At a recent ANLA webinar, Marcus vandeVliet of MV Consulting stressed the importance of knowing your numbers. If you don’t know what jobs are profitable, or how much revenue each of your salespeople is bringing in each week, it’s difficult to know where to go.
As a business owner, it’s your responsibility to have a handle on the numbers that tell you whether you’re going to make it – and to make sure each time your crews go out to an installation, they’re bringing back more cash than they left with.
He summed up a solid approach to budgeting and pricing: “Don’t just hope for profits.”
Profit by project, vandeVliet says, is the single most-important metric an owner must watch. It gives you real-time data on how your company is performing. Profit-and-loss statements have good information, but they give you old data, and a static picture of your business. They don’t give you information you can use to actively manage your sales team. Leave the P&L to your accountants, and take the profit numbers to your team – the people who have the most impact on making them go up.
vandeVliet described five factors that determine profit:
- Need. How badly do you need this project?
- The marketplace. How competitive is it? Is the job a direct referral, or a low-bid commercial project?
- The customer. Look at his personality and his expectations. A high-end residential customer might have different ideas about plant and material quality than a property manager.
- The size of the project. Smaller projects need a higher percentage of profit, because they bring in less revenue. Larger, big-ticket jobs can have smaller margins.
- Risk. What risk to you is associated with this job, and how does it impact what you charge?
But what if each of your projects is profitable, and you still see red?
vandeVliet’s message about hope goes deeper than just planning your success every time you send out a proposal.
It means that a successful business needs people at the top who are actively working to ensure their company’s future financial stability. That means paying themselves first, keeping an eye on the numbers and not bidding jobs at rock-bottom prices just to keep the doors open another week.
If you can price low and still make your margins, then good for you. But before you run out and bid every project you can at whatever price will sell, take a good, hard look at your numbers and find out if you can make more money with the business you already have.
The author is editor of Lawn & Landscape. Send him an e-mail at cbowen@gie.net.
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