5 Tips for Profitability

As a business owner, you put a great deal of time and money into your business every day. Your hard work should be apparent in your contractor business’s profitability. But if you aren’t making as much money as you thought you would be, then it may be time to look into business growth strategies so you can grow your business and increase your profit.

To get you started, we wanted to share five tips so you can maximize your profitability.

  1. 1. Know your price — and charge it.

If you’re going to make any money, then you need to get comfortable with knowing your price — and charging it. Once you’ve figured out how much it actually costs to profitably run your business, then you have to set a number and stick to it. When you do, not only will you be able to cover your company’s cost of operation, but also make a profit while doing it. The customers you want will happily pay your price because they know the value of what they’re receiving. 

  1. 2. Develop a cash flow budget.

Running a profitable business means you’re running it thoughtfully. If you have yet to develop a month-by-month cash flow budget for your company, then the time is now. Showing profitability at the end of the year doesn’t matter if you went out of business back in March! And odds are, you’re going to have cycles in your company. That’s why you have to plan ahead if you’re going to make it through the slower months. Put together a cash flow budget today and follow it so you can maintain cash flow through inevitable slow times of the year. 

  1. 3. Recognize the profitability of your pricing. 

Depending on the markup that you use for materials, your pricing can dramatically impact the overall profitability of any job that’s completed. You have a certain amount of overhead in your company, and part of it is going to be covered by materials, while the other part of it is going to be covered by your labor rate. You have to know what the total combined profitability is for the individual jobs you do, and then make sure you’re charging enough to cover your costs and generate profit (but not so much that you price yourself right out of a job!).

  1. 4. Establish a profitable maintenance agreement program. 

If you don’t have a profitable maintenance agreement program in place right now, you need to get one. If you want to get out of it at some point, then you’ll need to have two things. First, your company will have to be able to function without you. And second, you will need to have some type of guaranteed monthly income. In this business, the closest we can come to guaranteed monthly income is a solid maintenance agreement program. Put the program in place, make sure every person in your company knows how to explain the benefits of the program from the customer’s perspective, and implement it.

  1. 5. Perform a monthly financial review. 

In the business world, ignorance is not bliss. You need to know your numbers, and you need to know them well. That’s why you have to perform a monthly financial review of your company. You need to look at your finances every single month and be honest with yourself about them. Most contractors only look at their finances two or three times in a year, and they’re likely outdated. If you want to be profitable, then you need to look at your finances every single month. It only takes about 30 minutes to walk through your finances, understand what they’re telling you, and make course corrections along the way.

Start Planning for More Profit!

At Grandy & Associates, our mission is to teach contractors how to run profitable businesses. That’s why we provide HVAC business help and HVAC business growth strategies, as well as many other contractor business training opportunities. We believe every business deserves to grow. Join us at an upcoming workshop so you can start building a more profitable business! 

 

Carlyle Compressor Teardown Full Course - Self Paced Online Training

Planning for Profit Workshop

Cashflow and Cashflow Budgeting

Service Managers - Learning Path

Carlyle Compressor Teardown Full Course - Self Paced Online Training

Planning for Profit Workshop

Cashflow and Cashflow Budgeting

Service Managers - Learning Path

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