If there was just one thing you could do in your business that would instantly increase profit, would you do it? Of course you would. The sad fact is, however, that very few business owners have been told about this step.
If your building business does more than one type of work, this step will provide information that may surprise you. The key is to split apart the financial data so that you can see the figures for revenue and associated costs for the different types of work you do.
Consider the following example. A builder client who did renovation work and new construction work. He was doing well, making good profits but even though he had increased his revenue significantly, he hadn’t increased his profit and he was frustrated with his results.
He changed the accounting system so that the bookkeeper could record the revenue from the two types of jobs separately and at the same time allocate the costs against the two job types too. After a few months of entering data in this way, he reviewed the profit position for each job types.
Interesting results emerged. He found that he was making good profits on the new building work, but losing money on the renovation jobs.
Armed with this information, he was able to delve further into the renovation jobs with a view to identifying why the losses were incurring and then how he could reduce the costs, improve productivity and whether there was any scope for increasing his prices on the renovation jobs.
Not only that, but it helped him to understand that to grow the business all he needed to do was focus his marketing activity on the new building work that was giving him the good profit margins and get more of that type of work into the business.
Are you getting this level of information in your business? If not, then find a way to start recording your financial information in a manner that will allow you to get this information so that you can identify whether your business is losing money. Once you have the data, you can make an informed decision about what to do in the future.