The Profit Builder Unscripted

Where Profit Leaks—and How to Plug It

• Vicki Suiter • Episode 61

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The four ways to affect your bottom line—and why “just sell more” isn’t a strategy.

Story: Frank was busy, clients were happy, but profit lagged. The audit showed pricing and billable capacity—not volume—were the culprits.

Key Takeaways

  • There are only two ways to affect profit: increase revenue or decrease cost. Each has two paths → 4 total levers.
  • If staff are “billable,” set clear billable targets
  • Shift non-revenue tasks off billable staff—or right-size the team.
  • Charge correctly for labor (fully burdened cost + proper margin) because labor is your highest risk.
  • Look for production efficiency before you assume a sales problem.

Try This This Week

  1. Audit each role’s billable % vs. target.
  2. Recalculate fully burdened labor cost and bill rates/markup.
  3. Identify 2–3 non-billable tasks to reassign or eliminate.

Resources Mentioned

Resources:

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If your bottom line profits are not meeting your expectations or you're working super hard thinking, I am not making enough money on the bottom line to have it be satisfactory to you, then you're going to want to make sure to listen to this recording because today we're talking about what are the key things that you might want to look at that can be the difference that makes a difference in your bottom line profits. Hi, I'm Vicki Souter and welcome back to the Profit Builder Unscripted.

Last week when my new client, Frank, said to me, I know that I'll be more profitable if I just sell more, I knew that he was in the right place to be having a conversation with me because my first response was, well, not necessarily. I see this all the time where contractors think that if they just sell more, they're gonna be more profitable. But when Frank and I started to dig into his numbers in the financial health assessment I was doing on his business.

What the numbers really revealed and showed was revenue and volume wasn't necessarily his problem. And he had a much bigger problem with how he was charging for his services. Now, to just back up, when Frank first came to me, he came to me because he said, you know what, I'm really struggling. I'm working really hard. I'm selling projects. I'm keeping my staff busy. 

I am managing all of this stuff and I'm doing the best that I can. Like we do great work, clients are really happy. I think that I'm pricing right. I don't have that much scope creep. Like we were paying attention to change orders, but I'm just not making money on the bottom line. And it's really frustrating. And as we started to dig through his numbers, what it really showed was you know, and he assumed like a lot of contractors do that his issue was that he just had to sell more. He thought, you know, if I could just sell more, I'll make more money on the bottom line. And the truth is, you know, the first thing I said to Frank is there's an important distinction here that you need to understand is there are actually four ways to affect your bottom line. Well, two to start with.

But four in total and you're only looking at one element of those four things. And so what we started to do is to dig through his numbers and we started to look at what were those things that were actually impacting his bottom line. And the first thing that I said is, know, understand that the only two ways to affect your bottom line are increased revenue or decreased cost. And the only two ways to do either of those things is two ways to increase revenue or to sell more, which is what Frank's only focus was, or to charge more. And then the only two ways to reduce their expenses are to literally cut your overhead costs, cut the costs of what it costs to run your business, or become more efficient in the production side of things. Now, as we started in, and I will tell you that the fourth one is oftentimes the most difficult one to be able to affect on your bottom line.

 And as we started to look at the numbers, what we discovered was, the issue was not really a revenue issue. And you could have considered that it might have been in part a revenue issue because what we also revealed is when it came to the production side is that the amount of time that was billable by his quote unquote billable team, right? The ones that were producing the revenue that were being either billed time and materials or being billed on a project basis.

They were not billing at some goal of capacity. So what do I mean by that? Well, we started to look at it and I said, well, you for a, for the design part of your business, you should have targets for your designers that they are after holidays and vacations are kind of taken out, you know, sick days that are all that is taken out of their available hours to work. They should be 90 to 95 % billable. And he was like, Oh, well, I've set a target of 50 % billable. I go, well, that's first of all, part of your problem. If they're billable staff and the intention is to have them be billable, they should be at a higher level, on a higher amount of billings. And then I said, so let's talk about your bill rates. as we started to talk about staff, we really looked at what is it that is causing them to be not more billable, right? 

And as he started to explain to me, he goes, well, I have this woman doing all these other projects and I have them like doing these other things. And so as he, you know, started to dig a little bit deeper about what it is that he's having them do, part of what he realized is he was spending all of their energy and time because they're really bright and really smart doing things that weren't generating revenue. And then what he ended up with is too many staff. Because then when we started to look at the rest of his staff, it was like, well, and then he had some subcontractors who were working for him. And then we started to look at, you have, could you shift that around? Could you have other people doing, you know, that are not up to par with billable, take out the subcontractor out of the equation and have them do the work? Or you're faced with, you have to let someone go.

So this is one of the two ways you affect the bottom line, right? Increase revenue, decrease cost. Decreasing cost meant he may have to let go of one of those people. Now his other option was he had to sell more, right? In order to actually have them be at capacity. And so, you know what, the question that I asked for you is if you're struggling to make a profit on the bottom line, is it possible that you have people on your team who are not functioning at, who are supposed to be the people who are generating revenue for you, right? They are a direct cost of your business and doing work. Are they generating enough billable time and billable hours? And do you need to maybe adjust how many hours they're working? So it's not always a revenue issue. And, you know, and as Frank and I talked about it, and we talked about, all right, like let's set a revenue goal because that's important. What would it look like for you to have those people be fully billable? How much money would you actually have to, how much work would you actually have to generate? So it's a simple thing to start to really look at when you're considering what's impacting your bottom line. Remember, there's only two ways to affect the bottom line. It's increased revenue or decreased cost.

The only two ways to increase revenue are one to sell more or to charge more. The only two ways to reduce cost is literally spend less and overhead. And in Frank's case, it was he had to stop having so much non-billable time going to overhead for his team and or reduces overhead costs or become more efficient in production, which was sort of the flip side of that, right? He needed to get those people so that they were more billable and spending more time on billable work. So the other thing that we looked at for Frank was how much was he billing people out at? And we had to adjust for that as well because he also was not looking, you know, he's not really charging enough for labor. And, you know, as a contractor, your labor is your biggest risk factor and is one of the key places where you really need to invest in ⁓ making sure that you have a high enough markup on labor in order to accommodate for the risk that you have of labor. It's, you know, if you have subcontractors, you get a price for them. If you have purchase orders for materials, that's a fixed price. But when it comes to labor, it is your biggest risk factor. So making sure that you're really clear about what are all the costs associated with having that employee and am I marking up enough for that employee.

And I'm going to include in the resources below a link to where you can actually calculate that for yourself, where you can calculate. And in this table has instructions and everything about how to really calculate what is it costing me for employees and making sure that you're charging enough for them, and that you're bidding with an assumption that you have the full cost of that employee in there. And the other thing that I would say is, is a takeaway for you for here. You know, I ask you the question, do you have some conversation in your head about, I just have to sell more? And maybe it's worth, as we did with Frank, doing a little bit more digging to look at what really is the issue, what's the problem? So I hope that you found this to be helpful. I'd love to hear your thoughts about it. And I would just ask you, if you find this, if you find this content helpful, make sure to subscribe to my channel.

Do videos like this all the time with tips and ideas about increasing your profitability and also about teams and how to get teams be more productive and help you as a business owner have more profits on your bottom line, more time in your day and reclaim the joy and fun in what you do again. All right, thanks for being here today and I look forward to seeing you next time on the Profit Builder Unscripted.


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Vicki Suiter

Host