Many tradies/business owners tell me they don’t like numbers, but most tell me they like money!
When you get a handle on your numbers you will make more money.
Here are a couple of things to keep in mind:
1) Knowing how much you make on each job will help you work out which jobs you make good money on and which jobs you lose money on. This way you can avoid the jobs that cost you money and focus on the jobs that make you money. These types of jobs can differ from business to business so be sure to work it out for your business.
2) Pricing jobs correctly is a skill that can be learnt and refined. Basing your prices on what your competitors are doing is not a great strategy. You will be surprised, often your competitors don’t know what they are doing!
3) Never confuse “mark up” and “margin.” The mark up you need to apply to the costs directly related to the job is always going to be higher than the margin you want to make and you need to have a healthy margin to help pay for your fixed expenses and of course ensure you make a profit.
The easiest example is if you want to make a margin of 20% you need to mark up your price by 25%. $ 800 marked up by 25% is $ 1000. A $ 1000 minus $ 800 equals $ 200 which is a 20% margin. We have a simple calculator which can help you work out your margins and mark up. If you’d like a copy just send me an e-mail and I’ll send it to you.
4) Cash flow is like oxygen for your business, without it your business won’t survive. Winning the job and doing the job is good, getting paid on time in full is even better. You need to know who has and who hasn't paid you.
5) Measuring and monitoring your numbers. Small changes made quickly can have a massive impact on your profits and cashflow. Having a simple dashboard so you can monitor a few key numbers will help you stay on top of your numbers so you can make informed decisions quickly and easily to maximise your profits and cashflow.
Knowing your business numbers is how you keep score and keep your business on track so you can build a strong business, make more money and have more time to do the things you enjoy.