The Profit Builder Unscripted

Three Strategies Boost Construction Company Profits

• Vicki Suiter • Episode 17

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Do you struggle to consistently meet your financial goals? In this podcast episode, find out the 3 things I have all my clients do that make a HUGE difference in being able to not only meet but exceed their goals!

In this episode I share Joe and Steve’s story of how they went from struggling to make a consistent profit in their construction business to exceeding their financial goals AND having more peace of mind.

Initially overwhelmed and lacking clear objectives, they realized that simply increasing sales wasn’t the answer. Instead, they focused on 3 key strategies that transformed their approach.

They created an operating budget with specific financial goals, used a backlog report to track future work, and regularly reviewed their progress. This approach gave them clarity on their financial health and allowed them to anticipate potential issues

Listen now as I share the details of what they did and see how you can do the same in your contracting business. Make sure to check out the FREE resource I provide for tracking backlog to help you start to have more peace of mind and generate more consistent results! 

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welcome back to the profit Builder unscripted today we're talking about what are a couple of things that you can do in your business that will help you have a greater control over the profitability of your business okay let's jump in are you interested in increasing the profitability of your contracting business if so keep watching or keep listening cuz I'm going to share two things that could be the difference that makes the difference and helps you not only increase your profitability but maybe even exceed your goals I just finished a meeting with my clients Joe and Steve and when I first started working them with them a couple of years ago they were struggling to make a profit they were you know they didn't really have super clear goals about their revenue gross profit margin NBT profit margin and they really just like were constantly sort of missing the mark even when they did have a revenue goal they weren't they weren't meeting it consistently and there's a couple of things that we did and that we've continued to do very consistently over these few years that I got to tell you it was so fun just looking at their financial statements this week and seeing how they've not only met their goals but they've exceeded their goals and I started to think about all right like what are the core things that I know that they've been doing that we implemented that is the difference that's made the difference for them and I even confirmed this when we were meeting and I and uh and I just wanted to share it with you because I think that sometimes we just work super hard and that we work at making doing all the things that we think when we know that we should do and um and we oftentimes think that if I just do more volume I'll make more profit but it's not the only part of the equation and that was kind of their mentality Joe and Steve when I first started working with them they thought well I just have to sell more I have to sell more and um here's what we did so the first thing that we did is we implemented them creating an operating budget so their operating budget has three well four really important components to it one is having a revenue goal which almost everybody has a revenue goal on their business and the second one was having a gross profit margin goal so contractors live and die by gross profit margin and gross profit margin is simply a p margin simply means a percentage and it's just the rate of return how much are you making on the work that you're doing so it's Revenue minus your cost of goods sold the cost that it takes to produce that project and then the difference between those two is your gross profit dollars and the percentages taking those dollars and dividing it by Revenue that's a critically important number that um you want to make sure that you a have a goal for and B that you um that you bid to it that you manage against it that you um that you pay attention to it the fourth thing that we did is we um set up a budget for their what is it going to cost to run their business their overhead budget like what's you know what's it going to cost in terms of salaries and rent and all that other stuff and then the next thing that we set was our net profit goal and a net grow net profit margin goal now when it comes to revenue it's going to be different for everybody right for them it was some number that was higher than it had been the year before but it was a realistic number their gross profit margin was specific to them and where they are in the industry so depending on the size of your business your gross profit margin could be different if you're a general or a sub if you do commercial work residential and so on and then net profit margin goal we set at a 10 to 12% net profit margin goal now the first year it was like we started out at like 6% and then the second year it was like 8% and this year it was 10% ideally you want to have it be between 10 and 12% if you're in the residential construction space either a general or a sub so we set those goals and we had them do a budget and then the second thing that we did was I implemented them doing a backlog report so that every month they were looking up and looking out and going what do I have in signed work in contract that I have not build for yet so it let them see where they were headed and let them see where and we compared that to the goal so there's a and I'm actually going to share down below a link to the spreadsheet that you can use in your business but it was like we um we I have them fill it out every month and what they do is they fill in what's it you know what's a future look like in terms of what do I have to bill against contract sign and then let them see where is there a Gap and I got to tell you this report this backlog report and tracking it it's super simple um is one of the most powerful tools I've seen PE contractors use in terms of having greater confidence and Clarity first Clarity and then confidence to take more powerful actions that confidence in where am I in terms of um do I have a shortfall how much of a shortfall do I have to fill this is huge because sometimes we think that you know we're just we're working on like sort of the Big Goal but what it what it does is it breaks it down into smaller chunk siiz goals which is which is if you can know where you're headed and you know where the shortfalls are before they get here you can do something about it um and then the third thing is every month they look at those two things they look at their budget compared to their actual and they look at where am I compared to where I wanted to be and they look at that backlog report and they're always in conversation and they don't just look at that backlog once a month um almost everybody I work with looks at it at least every other week it's so powerful like just those few things like setting a budget managing you know tracking your backlog and then looking at your results every month it's not you know and they what's interesting is that this year they have been um very consistent in meeting their numbers now it's not to say that they had some windfall projects come in it's not to say that they had um they had some like it was some booming economy right A lot of people are struggling this year with um getting enough volume in and because things are kind of sluggish in the construction industry well in a lot of places but what was interesting is them looking at that backlog report last year let them see where it was what it was looking like for this year and they started doing things last year when they were super busy to make sure that they were filling their pipeline of backlog of work I'm sorry this so that they could start filling their backlog of work for this year and they it's like that whole thing of being able to see it before its history lets us have that Clarity to have more confidence to take these powerful actions about how do I intervene in that future before its history so I just wanted to you know to share this with you because um doing a budget and then check in your backlog and continually updating that and then looking at your results that process and and Stephen Joe actually shared this with me because I was I was chuckling I was like oh my gosh like you've completely beat your numbers this year and it was the first time that they beat it and um they said that whole these are the three things that were so helpful because what it had them do is lifting up their head and looking every month at how am I doing compared to how I said I was doing where am I headed how am I doing compared to how I said I was doing where am I headed so that Pro that exercise of just doing those few things really helped them in such a powerful way as they described it like they were like every month we were having more clarity so that they gave us more gave us more confidence about what we needed to do to make a change what did we need to do to fill the Gap what did we do need to do in terms of doing more marketing or whatever um and so you know as you think about your business you've got a lot of moving pieces and parts and it can feel daunting and overwhelming and like and if and especially if you're only paying attention to the revenue number when you start to pay attention to those four key numbers that I talked about in terms of Revenue gross profit margin what are you going to you know what's it going to cost you to run your business and then net profit set goals for those things and then manage against it and then manage against a backlog report that compar s what do I have in future work compared to that budget that I set um and look at it regularly those two things uh really will give you so much more power to have more clarity and confidence to help you reach your goals and um and it's just it's not like there's any magic bullet to doing the work itself but it's that whole thing of what gets managed what's gets measured can be managed if you're not measuring it then you're you're you're in kind of a churn and I've seen this too right like maybe you can relate to that like we get into this churn of just working really hard and um and hoping that it turns out but the thing I found over and over and over again and I know it's so true for me in my business and in my life um and I've seen this repeatedly with the clients that I've worked with over these many years is the more clarity they have the better the data the better the feedback the better decision decisions that you make and then that that Clarity gives you confidence to make those decisions all right I hope this has been helpful to you um I'm dropping below a link to a free resource to do that um track start tracking your backlog I hope it's helpful to you feel free to reach out to me if you have questions and I look forward to seeing you next time on the profit Builder unscripted

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Vicki Suiter

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