24 Apr Key Practices to Make Your Business Profitable
Profitability isn’t something that just happens to your business on accident; rather, it’s something you achieve through the right financial habits, practiced day in and day out. If your home service trade business isn’t generating profits, then it’s wise to take a step back and review some of your company’s practices. Adopting the right habits isn’t always easy, but it can set you on the path to profitability.
Give the Right Estimates
One way to ensure a profit is to price your services correctly. As we’ve discussed in a previous blog, many service trades fail to understand that markup and profit are not the same thing, and that when giving a quote for any project, you need to factor in both overhead and the money you’ll set aside as profit.
A related problem that companies run into is that they simply price their jobs too low, hoping that their cheap prices will help them land work. If you’re having a hard time getting customers, that’s fundamentally a marketing problem; underpricing your services means you’ll never make a profit, even if you do win jobs, so that’s a dead end.
Work with Good Numbers
Something else you should do, routinely, is ensure you’re working with good numbers. Figure out your mark-up/gross margin, then never adjust that number to lower the sales price. Again, lowering prices just to be competitive is a losing game.
If you adjust that mark-up number, you’re definitely going to lose some of your profits, maybe even all your profits. You’ll also lose some of the money you need for overhead expenses—and of course, those expenses will still need to be paid, whether you lower your prices or not.
Set Aside Profit First
A final habit that all home service trades should be in is putting aside money for profit—before doing anything else. This, of course, is what the Profit First system is all about, and we’d love to walk you through the specifics.
For now, we’ll just say this: If you don’t intentionally safeguard profit, from every bank deposit you make, your business probably won’t grow. That’s because you’ll use everything you make to pay your expenses, market your business, etc. Hoping for “leftover” profit is never effective. There won’t be any leftovers unless you make leftovers, and that means putting profit first.
These are just a few examples of how setting the right financial habits can make your home service trade more profitable. To see how your habits stack up, and to unlock new ways to generate profit within your business, speak with one of our accountants/Profit First professionals.
We’d love to set up a free consultation. Call Contractor in Charge to start the process now!