4 Steps to Ensure You Make Profit on Your Projects
Do you make money on every estimate and job?
In the last Jobber Academy post from Profit For Contractors, we covered 5 ways you can win more business from your estimates. Specifically, we looked into why crafting a winning estimate and quoting for only Class A clients is so important. In this post, we’ll be discussing how to quote profitably; with a focus on leveraging important data such as your break-even margin and back costing.
In order to be successful in any contracting job, you have to start with profits in mind. Neglecting to quote profitably means you will have lost the ‘game’ before it even began.
Think of any sports game…
- There’s a strategy behind why certain players stick to specific positions and why they’re played at specific times.
- There’s also a strategy behind who gets paid more, and why.
- There’s also a strategy behind the next play chosen.
These strategies aren’t just pulled from thin air, they’ve been calculated, tested, and tweaked time and again for ultimate success.
This is exactly how you should be thinking when you’re about to step up to bat for a new job—think of it as your next play. What information can you pull from your last few ‘games’ (aka jobs), in order to win? The key is to be strategic so that you outsmart and beat your competition.
What information is important to know so that we can quote to win?
1. Know your break-even margin
In sports, hitting your break-even means only getting a tie. In order to make a profit (score more than a 0), you have to bring in enough margin to cover your yearly direct costs and overhead costs. By knowing this number ahead of time, you know your baseline minimum operating costs.
This means that you’re never quoting for failure right out the gate. You may be putting a 30% markup on all your quotes thinking that is your profit. However, if your breakeven costs are 20%, then you are only making a 10% gross profit. That means you would have to literally sell three times as much work to get to that target profit you desire!
Make sure you have the right tools to get you the data you need. Jobber’s integration with QuickBooks gives you real-time information so you can calculate these margins.
2. Quoting accurately to compensate for your work
Quoting for profits means you consider items that don’t have an obvious price tag attached to them. This includes costs like driving time/gas spent getting to and from the job site, time spent picking up materials from your suppliers, cleaning the job site at the end, and foreseeing delays in project completion due to coordinating with subcontractors.
Once you know your quote is on deck, make it a home run by allowing your clients to pay you however they like with Jobber Payments. If you are only taking cash or check then you are already at a disadvantage. A recent study by IPSOS found that consumers are more likely to choose a contractor with multiple payment options vs one that only takes cash.
3. Back costing to ensure you’re NOT losing money
What have you learned from some of your past jobs? Did you make any mistakes you could learn from? Were there leaks in profit on your last job? Perhaps you had the wrong crews on the job initially and it ended up costing you an extra week of work just to fix their mistakes?
Maybe you made a promise on a project completion date that you couldn’t stick to because your subcontractors didn’t hold up their end of the deal. Or maybe you underestimated the amount of material you would need just in case there was a mistake or two.
The good news is that it is never too late for you or your bookkeeper to start back costing.
Need help backcosting?
Check out the Profit For Contractors backcosting cheat sheet.
4. Differentiate yourself from the competition
In today’s competitive landscape, you need every advantage to win jobs and stay profitable. One of the easiest ways to differentiate yourself and increase your profit is to offer additional services your client would like.
Do you offer maintenance services following an installation project? If so, you need to let your customers know! Your client is likely looking for maintenance services and this is a great way to both increase your profits and the value that your clients receive.
In conclusion, the contractor of today needs to be an all-star both at doing a project and crafting estimates. Homeowners always want to buy with confidence so you need to make sure you have all the tools required to make them feel unique. Once you know that every one of your estimates is making a profit it’s simply a matter of executing and invoicing in a timely manner.