Maximise your profits with better planning

Maximise your profits. Anna Turner has some solid-gold tips on the benefits of good planning.

The market’s getting tighter, we can all feel it. So now is the time to double down on planning to maximise your profits. I know we are all too busy to put time into planning, but those who prioritise this stuff will get through the next few years. Every cent counts, now more than ever!

Watch the dollars

Set profit goals and plan how to achieve them.

This is a big topic, but as a bare minimum you should set turnover goals for the next couple of years. Off that you can set your net profit and gross profit goals for the same time periods and ensure all the jobs you quote meet or exceed that benchmark.

Cashflow planning has been made so much easier with accounting software like Xero and MYOB. Invoice often and chase each invoice the day it is overdue. Plan and track project start and finish dates to help with cashflow. Know who you owe money to and plan payments ahead of time. Try to reduce the overdraft and credit card fees as much as possible. Paying interest sucks!

CRM

Job tracking and scheduling goes hand in hand with cashflow planning, but it is so much more.

By tracking your lead funnel, you will know what volume of work you must quote weekly to fill the pipeline down the track. And the funnel will show you how long it takes to turn a typical lead into a project. For some companies the lead time from quote to boots on the ground is weeks, while with others it is years. Customer Relationship Management (CRM) software will automatically track this lead time, but you can also do it with a spreadsheet and mental arithmetic. Simply track the date you first quoted each project and compare it to the date you won the job. Over time the lead-time average will become clear.

Project scheduling

Project scheduling helps to plan subbies, staff, jobs and machinery. It helps me to visualise the gaps in the program, showing me clearly what type of work I need to chase and the gaps it needs to fill.

Lately I’ve been using software called Teamgantt to schedule projects and it’s been fantastic. Project scheduling makes work on site more efficient, which increases the profitability of the project. Adjusting the schedule daily takes time, but it helps you plan subbies, machinery, deliveries and staff, so it’s an absolute must for any construction project that runs for more than a week.

Last, but not least, you need to set time aside for staff planning. It’s a good idea to set up a spreadsheet to trach the following:
* The career path of each staff member. If you can’t identify a career projection for one of your staff, chances are they won’t be with you in a few years. Everyone needs to feel like they are able to improve their lot in life, so it is your responsibility as their boss to map out how work will help them achieve their life goals (even if they don’t think they have any). Try to identify skills gaps with each employee and create opportunities for them to upskill. You don’t always have to send them on expensive courses. A less-expensive alternative is to buddy them up with a colleague who can teach them a specific skill.
* How wages are likely to increase over the next 12-24 months. Many of you are pricing projects with a lead time of 12 months or more, so you need to factor those wage increases into your pricing. They say the economy is cooling off a bit (thank goodness), but your good staff will still be expecting a wage increase to stick around (refer to my point above), while at the same time clients are never keen on contract increases. Calculate how much your staff will likely cost you down the track and make sure the quotes you are doing now can accommodate that increase.

Planning will make your business more efficient and in turn create a greater profit margin for you. Make it a priority to set up these planning systems, like cashflow tracking. Once they’re in place maintaining them will be less work and deliver big insights.

Planning is always made better by reviewing. You must also make time to review the outcome to ensure your planning is more effective over time.

Image: cacaroot/Stock.adobe.com

 

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