During the lock down it’s a perfect time to strengthen the areas of the business which need attention.

Here’s you can see how to work on two strategies for profit to make your business stronger.

Today we’ll look at back costing. What we want to do here is to increase the profitability of your business.

 

Back costing is where you go back and review the jobs you have completed each month.

 

Profit slicing is where you take out individual products and services, understand what profit you are making on them, make them more profitable and put them back in bigger and more profitably.

 

If you haven’t been doing this start with the last job but go back 3/6 months.

Now’s an ideal time to be doing this and set up a process to be doing it ongoing.

Back costing

 

On construction jobs it’s important to review each month just where you are and invoice accurately. This can be extra work but worth it. A client of mine recently found they were not making as much profit on each job as they thought. Reviewing monthly is allowing them great control.

 

Back costing is a great Strategy for Profit to make your business stronger this also shows you – How accurate was your initial quote as well as:

    1. Where we performed best
    2. Which teams performed and which didn’t

When you know the answer to this you can look at what efficiencies you can make.

 

It’s like anything in business, you need to know the number first. The numbers are the facts, without facts you are basing decisions on feelings or emotion, which are usually wrong.

A construction client of mine found his people often managers, were going out to the suppliers to pick up materials instead of getting them delivered when they ran short, because they hadn’t planned in advance.

Simple planning meant all materials were delivered which meant all hands were on site and completed the work quicker instead of spending time driving around.

 

A Flooring company we worked with found the tubs of glue they I used costs a lot of money, the same with the nails and trim, most importantly they Found a way to charge into each job

 

Profit Slicing

Start by separating your sales and expenses. You should have a separate coding for sales on your Accounting software. If you have you will need to manually breakdown the figures. But start coding them differently ongoing, this will make life easier.

 

You want to understand what the profit is made on each product or service.

Some questions you need to ask yourself are:

    1. What’s the Margin made here?
    2. Which are and aren’t worth selling?
    3. How many are you selling?
    4. Which products do you sell the most of?
    5. How popular is it?
    6. How much can we sell it for?
    7. Do we need to sell it?

The answers to these questions should help you create your action plan going forward.

 

 

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