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Profit-Building Articles
Rocket ahead with a few of our recent Successful Home Builders' Newsletters... |
Getting That Elusive 20% Profit Margin (or More...)
| This week has some strategies to help you push your profit margin towards that 20% mark...or higher, and tells you how some builders get 15% to 20%, or more -- and how you can learn from their methods. |
| Getting More (Profit) From What You Already Have |
|
Any business, in any industry, has constant pressure from
(seemingly) all sides that, in the end, affects your bottom line.
Currently, for home builders, some of those pressures include
increased competition from the recent building boom, lack of
(good) trades and fluctuating material prices, as well as others.
Of course, all builders experience these pressures...so how is it that some weather these problems without any effect, and others are constantly dogged by these, or any other 'problem of the day?' |
| The Secret All Successful Builders Share |
|
The secret the first group shares is simple: they are no less
affected then any other builder. They, of course, deal with
the same problems and pressures as the industry...they
just deal with it differently.
A successful builder knows there will always be 'problems'... there's always 'something' -- and PREPARES for it, either consciously or subconsciously, by ensuring his or her business doesn't waste time or money in the relative 'good times', which would only be further squandered in the 'bad times.' |
| Lessons from Successful Builders |
| So...what do they specifically do, or do different? Here's a couple of strategies to consider: |
| Lesson #1: Stop Giving It Away |
|
Probably the most important change you can make in your
business is the actually get paid for the work you do!
Builders will erode their profits by reducing prices, or giving
things away just to get the job...or to avoid confrontation
during or after the job.
Now, I'm not suggesting you don't throw a few things in now and then, or fix something that went wrong...but know how it affects your profit when you do it. If you've ever seen "Real Renos" on HGTV, you'll have a sense of what I'm talking about. Having never seen Jim's work other than via TV, it looks great and, I'm assuming, is of equally great quality. But...almost every episode he's fighting for, or complaining about, money lost on the job. In a particular episode, Jim is sitting down with the owner, locked in a staring match, to recoup thousands of dollars for changes made during the job. It seems obvious Jim just went ahead with the changes before locking it down with the owner how much it would cost, how it would be paid, and when. Whether you're trying to get the business, or in the middle of a job, don't give anything away before you know how your goodwill affects your bottom line. If there's a non-financial reason to go ahead, or it's a fix to something you were responsible for...by all means. But if you're just trying to impress the client with your generosity, impress them with your value and business sense instead. Sit down, discuss changes, go through the proper change request process, get it in writing (it works both ways!), and continue with the great job you're doing. |
| Lesson #2: Systematize the 80% So You Can Deal with the 20% |
|
My philosophy (and general business guideline) has
always been, 80% of any business is the same day-
to-day, or week-to-week; 20% are the surprises that
come out of nowhere.
Systematize the 80% you can effectively predict, and free up your time, resources, and brain-power for the 20% that you can't predict. Case-in-point: A friend, and fellow business person, used to try to follow-up with prospects who called and left a message for him. Unfortunately, other things would get in the way, and he'd only get back to some...and forget, or abandon, the rest. We discussed this and he said, "I didn't have time to contact them all." But, I said, can you afford to lose them? "No...I need more business." Here were people considering spending money on his services, and he: a) couldn't afford not to lose them; but b) didn't find the time to contact them. Seemed to be a bit contradictory. So, what did he do? Hired someone to make the calls. Too expensive, you say? Maybe he thought so too...but look at it from his new perspective The person he hires: a) loves talking on the phone with prospects; b) does it for close to minimum wage; and c) frees up his time to actually run the business, do what he wants, and make more money (while ensuring his prospects are contacted). Because of it, he's seen a rise in his seminars (one of his 'entrance vehicles' to his services) and his business. The secret? He effectively systematized his call-back procedure, told the hired-hand what he wanted (and how he was going to measure the results), monitored the situation then, other than minor tweaks here and there, doesn't give it another thought. What part of your 80% can you systematized...make more effective...do quicker...or have someone else do, so you can spend more time running the business, becoming more successful, and doing what you want? |
| Lesson #3: Test Everything |
|
People tend to do things two ways all the way, or not at all.
Some put way too much time, and money, into an idea before
proving it...and then suffer great disappointment (financially
and otherwise) when it fails. Others are too concerned to fail
to even try.
How to solve both problems? Test, test and test. Just like you may buy one of a new building tool, try it out for awhile, then get ten more, do the same with your business. Have a website? Change your busiest (or least busiest) page and see what happens to the results. Got a new sales idea? Incorporate it with your next ten prospects and see what happens. Think a new business idea will free up your profits? Try it out on a small (but significant) scale, and measure the results. Don't try things haphazardly...but don't be paralyzed into doing nothing, and getting the same results as last week, or last year. Focus on one, two or five things, and try them out. It's your business...which is different then ANYONE else's -- find out what works and what doesn't. Keep the winners, and tweak, or reverse, the losers. |
Here's to your profitable results!
