How Do You Eat An Elephant?
In Today’s Coffee…
* 3 Strategies for Getting 5 Add'l Points
* 312 words, total reading time under 2 minutes
Everyone knows it’s one bite at a time.
We’ve just concluded our first Bi4Ci User Conference, sponsored by ProSource. We had one elephant-size objective: Help companies find 5 points of additional bottom line profit. Given that the 24 companies in the room totaled over $104M in Annual Revenues, this seemed like a big hairy aggressive goal. In reality it is not.
Attendees were shown multiple ways to achieve the $5M+ in additional profit…
Three strategies were the personal winners for those attending:
Raise parts prices on every project by 4% of revenue (if you are less than 7% total revenue today, you can).
Enforce every bid over $20K to a minimum of 35% of the total bid amount being. Stop believing your proposal tool; it falls short on too many jobs.
Find 2 hours per week more billing for each tech on your team; that’s typically more than $800 per tech per month more profit. Bill minimum 8 hours for every 8 hours paid. Do not give away time: planning the project, travel time, or any time on the project even if it is not on site.
How to verify success?
i. Keep total payroll costs below 35% of Revenue
ii. Top-line Gross Margin (revenues less what you pay for parts and equipment) should be 65%. Select products and categories with better margins.
So what does this mean to a $3M a year (12-15 person company)?
1 = $120K from Parts Mix (add’l 4 points)
2 = $150K from Labor Mix (add’l 5 points)
3 = $86K (9 techs) from Billing
That's $356K of additional profit on $3M of revenue – over 11 points of improvement with zero added cost. If you do only half of this you’ll get that extra 5 points.
The results are in the doing. Both selling and installing sides of the business can improve. It starts with your next proposal.