Do you know where you make your money?

http://www.contractorcoaching.com/mentors.php

The Golden Hard Hat Mentoring Program - "Taking Care of Business!"

If you think every different type of job you do is making you money, you may be sadly disappointed.

Not every job or type of work makes you money.

In fact, some are real losers.

In a competitive market your competition’s willingness to take the job cheap, or below your costs, hurts your Sales and bottom-line.

On the other hand …

Some owners may also be leeches of your profit margin. Slow payment, expecting you to do extra work for nothing, and the never-ending punch list.

It is painful to think what work will make you money but not really know, can steer you in the wrong direction.

This is where knowing your business metrics and having the right tools will help you optimize your approach to getting work.

Making smart decisions based on valuable information is the key.

Understanding your business metrics makes your business work for you.

__________________________________________________

How to Calculate Your Money-Making Markup!

Are you giving your work away because you're not sure what to mark your wok up?

Discover how to easily calculate your money-making markup for only $67. 

Click here to get your copy!

__________________________________________________

However, if you don’t know your own business metrics, you become the victim of your own ignorance.

Let me explain what I mean.

When I first started out as a contractor, I thought I made money on every job.

Unfortunately, that wasn't the case. Some made money, others made less or none.

This bothered me.

I kept asking myself the question: “Why?”

At a glance, I couldn't uncover the underlying details.

I kept thinking, what is causing me the problem?

With that drill-down question, I embarked on developing a method of uncovering and revealing what was really going on. In other words, the metrics.

You see, most contractors focus on the basic Job Cost VS Estimate result.

This is fine because it will tell you if you brought it in as estimated or if you didn't.

Sadly, it doesn't reveal what is really going on under the covers. The real root problem or problems.

In my “Golden Hard Hat Mentoring Program,” I give my clients my Job Characteristic Spreadsheet that points to the plus and minus of the project, expending of company’s resources, and even … the owner.

This drills down farther than the typical job cost report.

It also flashes to you the good, bad and ugly of the job, so you can make intelligent decisions about the work or owner.

The report displays the time to complete, size and type of work, as well as the consumption rate of the company’s resources.

The report also informs us to the turnover rate, profitability, and the collection cycles of the owners.

This compliments the company’s volume derivation and distribution of management time which establishes the best economic goals for the company to pursue.

The metrics are revealed in color. Red is dangerous, Yellow is warning, and Green is good.

Figure 1 Job Characteristics Report of www.hgassociates.com

To optimize your construction company’s profitability and maximum use of capabilities and capacities, understand where and with what work and/or owner you make your highest return for your effort. This is the smartest way to jump-start your company’s success.

By understanding the metrics, you’ll be able to focus in on the work where you make money and get paid.

Again …

Knowing your business metrics is the key to success.

Are YOU a Victim of “Cash Crunch?”

________________________________________

Build Your Business!

Discover the #1 business-building information you need the most!

Grab your free subscription by clicking here!

____________________________________

Are YOU a Victim of “Cash Crunch?”

As a business owner, you usually have many hats you have to wear.

On top of that, you've got a couple of dozen ‘urgent’ priorities dragging you away from what needs to be done.

With so much going on, being pulled in so many different directions, it is difficult to focus on what is most important to your business.

However, a word of caution …

Whatever situation your construction business is in now.

It is usually NOT just one ‘thing’ that is holding you back.

Instead there is a whole bunch of little things that conveniently slip under your radar.

On their own, they may not grab your attention.

Add them up all together and it is a different problem.

You see …

They feed off of each other.

They even have the ability to run a muck in what appears to be a healthy company, slowly, ever so slowly, making it sick and sicker.

Let me ask you a question.

Have you ever found yourself desperate for cash?

You might realize it after you've paid your bills, maybe not all of them, and found not enough left to pay you?

If that is the case, you’re suffering a ‘cash crunch.’

Cash crunches are the result of those pesky ‘little things’ that slipped under your radar.

It happens when you’re not paying attention to your business metrics.

The next thing you know, you’re caught short and … in a ‘cash crunch.’

Let me dig a little deeper..

Cash flow is the lifeblood of your construction business.

Without it, you find yourself shackle to an 800 pound Gorilla. Not nice.

With poor cash flow you find yourself …

>>>Wondering where all the money went.

>>> STRUGGLING to pay your bills.

>>> Robbing Peter to pay Paul.

>>> Doing without for yourself and your family so you can try and keep the business alive.

Or even worse …

Not paying all your bills including Uncle Sam!

Seriously, put some thought into this. Aren't you missing something?

I can tell you the answer is a resounding YES!

What this boils down to is NOT understanding your business metrics.

As I said earlier, cash flow is the lifeblood of your business.

________________________________

Wearing Too Many Hats?

We can help!

Watch this 8-minute video and learn what you need to do 

by clicking here!

________________________________

With that thought in mind, here are some metrics you need to know.

ACC – Account collection cycle. Basically, how long does it take you to get paid on your receivables?

CCC- Contract to cash conversion. How long from the time you start the work until you get paid the last dollar owed to you.

Working capital. The amount of money available to you after you've paid your liabilities.

Capital Reserve. The amount of capital you need to have available to you in order to pay your bills according to your ACC.

And that’s just for starters.

I usually find that these other following items impact cash flow.

Pricing model. The amount you markup your work to arrive at a selling price.

Leakage. What you are unnecessarily expending with no return for its loss.

Seepage. What you freely give away to get the work.

Haltering. Taking on too much in Sales without the capital funding or the resources to support it.

So if you find yourself at the end of a month, good or bad in revenue, still scratching your head wondering where the money went …

You have a serious cash crunch problem, and … you need help NOW!

________________________________

Talk to Henry!

To schedule a no-obligation conversation with Henry Goudreau, America's #1 Business-Building Coach for Contractors, click here!

Let us help you design a BETTER, more PROFITABLE Business.

_________________________________________

Why People Won’t Buy From You

Have you ever gone through a sales presentation thinking this is really best for the customer, and then they do not buy?

You can’t force anyone to buy your services. However, you can take action to avoid the reasons they play out in their head for not making the purchase. Hopefully, by doing this, you’ll encourage them to buy instead.

Today, people are wrapped up in themselves and their daily lives. They are often too busy to stand back and analyze what is best for them. They will make time for what is important to them, but not necessarily what is important for them. Instead, they conjure up all kinds of excuses for not doing it. 

To remove them from this vicious circle of no, show them how your product or service will truly benefit them, all while touching their emotional touchstone.

Understand that everyone buys for emotional reasons. These emotional buying triggers are:

• They need something

• They want something

• They desire something

• They have a problem they want solved

No one likes to be sold. This is even true for you. However, everyone likes to buy. Any form of steering them away from being sold to the enjoyment of buying can also speed your closing along the way.

______________________________________________________________________

Looking to pump up your marketing? Get Henry Goudreau's digital eBook;  "The Contractor's Magical Marketing Tool Belt" Jam packed with marketing information and examples for the savvy contractor who wants his ads to ring his cash register.

>>>Get your copy here for only $97!<<<

Just one sale will give you back your money a hundred times over.

_______________________________________________________________________

Other people have a fear of buying. What if it is a mistake? This is where your testimonials and credibility plays an important factor. Find a shortcut from the doubt to the benefits that they will enjoy after they made the purchase. Show them how you’ll eliminate their perceived doubts, step-by-step.

Others may not understand what they are purchasing.

Provide as much information on the product benefits since the average person can emotionally tie to benefits over technical specifications. I've seen contractors go deep into technical specifications and jargon completely losing their clients attention. You are trying to sell the value, or as famously said, the sizzle, not the steak.

Still others are focused on price. It is true everyone wants the best price. It is also true that there are some people who will be never satisfied with whatever low price they get. I’m not a fan of being the low price. Instead, price out what it will take to give them what you promised with a reasonable profit. 

Realize this.

When your customer is focused on a lower price one of two things is taking place.

1. The person just wants cheap and most likely will be a problem for you if you drop your price.

2. You have failed to touch their emotional buying so they are resorting to logic which is price.

If you can't get them focused off of price remember Kenny Roger's song the Gambler; "

"You've got to know when to hold em, know when to fold them, know when to walk away."

Learn to ask questions that will help you uncover their emotional buying trigger that they are using, then adjust your sales process to satisfying that trigger. You’ll close more deals at your pricing and a lot faster.

Understanding the Business Metric of Volume Derivation

I was reading a question posed on one of the construction group forums last week that asked how much volume a contractor should have to be successful and make a profit.

Unfortunately, the basis of the question is wrong to begin with. It assumes that there is a ‘magical’ amount that makes things work (I had to laugh when I saw some of the answers, especially from so-called ‘experts’). Sadly, there is no one size fits all.

Here is how it really works.

The idea is to develop a realistic model of a company’s capacity to perform within its marketplace, an optimum market mix, and the optimum use of the time and skills of its management staff.

The key word here is “Optimization.” That means utilizing the full capabilities and capacities of the company.

The derivation is based on an optimum Distribution of Management Time, typical Job Characteristics of the market, and the Overhead Expenditures needed to attain a balance among sales, production and finance.

These three sources of information formulated from the existing company provide the base for the model that will guide company’s capacity to sell, perform, and finance its volume according to capacity.

The company’s Volume Derivation combines data from the Distribution of Management Time, the Distribution of Job Characteristics and other pertinent statistics such as capture rates and markup rates to perform a series of calculations. This is the capability of the company to achieve the volume.

It is these calculations that set the sales goal for the company and its people. These calculations also balance the Sales production and Financial Capabilities of the company, which drives the optimization factor.

I teach this to my Golden Hard Hat Mentoring Group. That is why they understand what they need to produce for sales and by utilizing the Job Characteristic Report, which sales optimize profitability and management time.

Unfortunately …

Most contractors try and sell as much as possible, mostly at low pricing models. Selling alone will not make a company successful, and neither will the advice of a consultant or coach who doesn't understand Volume Derivation. 

Remember, optimization of the company’s metrics will always produce the best results.

Do You Understand Your Business Metrics?

Are you struggling with your businesses because you don’t understand what drives it?

Every business focuses on making sales, paying the bills, and hopefully making a profit.

However, there are other financial and performance measurements that can provide early warning signals and detailed avenues to greater success.

At this point, you may be asking …

What are business metrics?

They are a unit or units of measure to gauge and detail a company’s performance and provide the company’s management with standards of improvement.

For example.

You may ‘think’ it would be a great idea to hire a new employee. Maybe, you think it might make things easier for you, or grow your business. The true answer is, how do you know? Can you prove it’s in your best interests?

It is NOT what you ‘think’ is best, it is what you can justify within your exiting capabilities and capacities of your business.

In my Golden Hard Hat Mentoring Program, I show owners of construction businesses how to measure, track, analyze and justify their business metrics. In hiring people, we use the program’s distribution of time to develop the metrics for each position within the company. Based on the strategic business plan we have developed together, and the existing performance of the company, we can clearly justify when it is required by performance for new hires, thereby eliminating a top heavy business.

Another example that I see so often, is the ‘thinking’ of which work is most profitable for the business. Unfortunately, for most owners, this is nothing more than a thought based on emotions. Remember, we want to measure, track, analyze and justify. To do that, we use the program’s Job Characteristic Report to show us, based on our specific parameters, type of work, or owner that provides us with the highest return for our efforts, thereby eliminating that work or owner who hurts our bottom-line performance.

Even one more element is understanding your pipeline and backlog metric. As we all know backlog is the amount of work you have in the work process at various degrees of completion. Your pipeline is the amount of work you expect to funnel into your backlog through your marketing, lead capture and capture rate of the leads into signed contracts. Based on your turnover metric, we can calculate your maximum and minimum backlog you should have at any given time.

_____________________________________________________________

Discover how to take avoid making business mistakes when you download our FREE report "7 Ways to Kill Your Construction Business Overnight!"

_____________________________________________________________________

The use of business metrics, including the measuring, tracking, analyzing, and justifying help keep the business on its target, and within the capabilities and capacities of the business. As in all things, it is critical to the success of the business to know the right parameters – and then to know how to use them. Measuring with the wrong metrics can do more damage than good.

Here are five easy tips:

1.      Understand and know your businesses capabilities and capacities. I hate to say this but I see too many contractors get themselves into trouble because they do not understand their capability and capacity. You only have so much time, money, employees, equipment, knowledge and experience. Use it wisely.

2.      Understand measure, track, analyze and justify. Every element of your business should be exposed to this concept. Accountability is fundamental to effective management and decision making.

3.      Determine the correct metrics. You need to determine the correct metrics, and then make sure you fully understand them and have the proper tools and information for measurement. Choose your metrics that best fit what matters to your strategic business goal, from which individual objectives are created.

4.      Avoid the pitfall of ambiguity. Your metrics must be extremely clear. A broad goal like ‘increase sales” can leave everyone with different ideas, thereby producing failure. Your metrics should be so clear that an outside person could come in and check whether the objective has been met. Clarity produces certainty.

5.      Invest in the knowledge, help and tools that deliver. To make this work for you, you need a working knowledge and real-time feedback. In the Golden Hard Hat Mentoring Program we provide owners of contracting businesses, the knowledge, resources and spreadsheets that feed the vital information to the owner via dashboards that allow them to quickly view and analyze its performance.

     Here is an example of a dashboard that show the financial and employee metrics to do its

     yearly volume:

From this snapshot, we can see the following metrics from a fictitious company we will name, Your Construction Company.

The company plans to do $1,000,000 in volume at a markup rate of 1.45, and produce a bottom-line of $85,000 after paying its owner a reasonable salary. The company will need a capital reserve of $152,500 in either a line of credit or cash, or a combination of the both to properly fund its goal.

It collects on its receivables every two months, and it takes the company approximately 150 days to complete its average project.

The maximum backlog amount it can’t exceed is $200,000 and its minimum backlog amount in cannot go under in order to maintain its goal is $145,161.

As long as the company controls its expenditures and reaches its goals in all areas, its break-even volume is $725,806.

Based on its capture rate, the company will have to bid approximately $14,285,714 of new work in order to produce its desired volume of one million. This metric indicates that either estimating or the companies target market may have to be reviewed.

According to its time management requirements, it has the correct number of estimators, and project managers. It has an excess in salespersons which indicate that with proper modifications in its sales people it could increase sales.

______________________________________________________________

    Talk to Henry

To schedule a no-obligation conversation with Henry Goudreau, "America's #1 Business-Building resource for Contractors," click here!

Let us help you build a BETTER, more PROFITABLE, more ORGANIZED construction business.

__________________________________________________________________

Keep in mind that you will need to reevaluate and adjust your metrics as your business priorities change. Fortunately, this program shows you how to accomplish that. Such knowledge is extremely helpful in making every effort to achieve what you set out in your strategic plan, even if your targets were off.

Unfortunately, too many owners of construction business don’t always recognize what makes their businesses work thereby stunting growth, profitability, and the freedom they desire in their lifestyle. When you invest time and thought into setting, monitoring, sharing, and refining your metrics, you’ll be amazed at how much more in tune you are to the state of your business, and how much more easily you can make the critical decisions that can catapult your business’ success.

Remember, your business metrics is what drives your business to success!

#successincontracting

How to Make 2015 Your Best Business Year Ever!

Are you constantly struggling with financial headaches in your construction business?

Unfortunately, most contractors are because they do not understand their business metrics.

One of the first things I'll do with a new client who wants their business to be a better success, and after I've helped them sort out their financials, is to do a budget.

It is amazing how they change their results simply by learning a new mindset. It isn't easy, it does take time, but the results are worth it.

Let me simplify it for you.

Think of your business as a bucket. At the bottom of the bucket is a hole. We'll call that hole spending. How big it is, or how small, depends on your spending.

Think of the amount of water you pour into the bucket as sales. Sales depend on how much water you can collect and carry. As you pour your water into the bucket, some of it, maybe all of it, runs out of the bottom. Which means, you need to collect more water (sales).

So, the more water you can keep in the bucket from running out, the more money you'll have in your account. The idea is to maintain the correct level of water in the bucket at all times. It is all about control.

Budgeting is one of the tools you use to control the size of the hole. The smaller you can make spending, the longer it will take for the water to run out.

I like to have my clients develop a strategic business plan. Then, we turn that plan into a budget. Think of your strategic business plan as your map of where you want to go, and your budget as your GPS. When you add monthly reports on your progress, you now know your variances and what you need to do to keep on your course.

I realize it is over-simplified, but I hope you've got a better idea of its importance.

No matter how busy you are, try to find some time over the next two weeks to reflect, think, give and plan.

Meanwhile …

I’m offering a free report titled: “7 Ways to Kill Your Construction Business Overnight!” It will help you to avoid the problems that plague most contractors. Click on the title to get yours today!

And remember, do not neglect to commit to set this business planning time aside, or you will find that the business of life can and will get in the way.

Are You Chasing Deals?

I have to be honest. I'm seeing a lot of contractors chasing deals. These deals are promises of work if they can beat the price. To me, that is a losing proposition.

In my 40 odd years of being a contractor, I too in my early years, fell into the trap of chasing the deal. I learnt quickly, deal chasing is a losing proposition. You see, only the owner wins the deal.

Let me ask you a question.

Have you ever, agreed to beat the price to get the job, lose money, and years later when the owner sells the project for a profit, have him call you up and tell you he has a check for your share of the profit he made off of you doing the work for nothing?

I doubt it.

The truth is, they put the profit in their pocket and move onto greener pastures.

So, why does this happen?

In some cases, it is desperation. Needing a job to produce cash with hopes it will buy you time or profit. That is not the way to run your business. That is an act of desperation.

In other cases, it is ignorance. Ignorance of knowing what the meaning of the value of what you are selling, or the value in money to your business.

I was had a very smart surety agent tell me that "All the work in world for nothing still adds up to nothing. Volume doesn't make up the difference!'

Here is what I know.

I get to work with hundreds, if not thousands of contractors over the last 20 years or so. I've seen countless financial reports and performance reports for these contractors. I can say without a question, the majority do not know their financials, how to use them or how to correct them. And almost all, told me that they did know them. That is the common underlying factor. You see, they thought they did.

The other flip side of the coin is, those that did not allow their ego to get in their way, were willing to do the work, and made massive improvements and profits just with a great working knowledge of their financials. They completely turned their business and lives around for the better.

However, let’s return to the why does this happen.

I said earlier that it either was chasing a deal for desperation, or ignorance of not knowing the value.

They are both correct, because one leads to another. 

Let me explain.

If you do not sell the value of your services for the right amount of money, manage that money correctly, you are forced into desperation. You can't even be desperate unless you don't have the money, correct?

Therefore, you must understand the value of money and its worth to you and your business first.

And that, brings us to a basic and common problem. Most contractors are using either a bogus or wrong markup. In other words, what they sell the job for isn't enough to cover their costs and make them money to begin with.

This leads me back to something I've learned from working with so many. If you do not have a working knowledge of your numbers, you have no way near a working markup rate.

To correct this, you need to grasp a better understanding of your numbers and your markup rate.