View Full Version : What to review at the end of the year
12-13-2012, 12:35 PM
We are located in a smaller demographic that does work in about 7 different towns. I compare sales per town, and find where my strength's and weaknesses are. I also keep track of the amount of time that it takes to complete each job and keep track of the profit per job. At the end of the year i review each job and check to see if my prices per unit are where they need to be according to profitablitliy. All of my pricing is on a unit bases. Ex: My retaining wall prices includeds all material and labor. I also check my budget against my actual spending. Are there any other design build companies that do things differently?
12-13-2012, 07:07 PM
......Are there any other design build companies that do things differently?
Of course there are. Many contractors aren't businessmen / women. Most of them have no idea if they walked away from a completed job with a net profit of 42% 0r a loss of 8%.
12-14-2012, 09:10 AM
DVS i was hoping you would chime in. I have been following this forum for a while and you seem to always have input. Can you elaborate on what specific areas that you review? On the point of not knowing what they made at the end of the job, i completely agree but i dont understand how people could look past this. The employees check their checks every friday haha.
12-14-2012, 10:17 AM
I do not review anything at the end of the year in terms of individual jobs. Now reviewing expenses such as insurance, phone, tool, etc., I might look at numbers and see if there is anywhere I can save money. I switched insurance companies about 3 years ago and I'm paying about $2500.00 less per year.
As far as individual jobs, Lets use racing as an example. No matter how you finish that race, whether you came in third, last, or first - you're always trying to improve.
So I have a system that I crafted over the course of about 8 years where I can track each job as its being performed and I know if we're making or losing money. If my individual jobs are losing money then I know the business is in trouble. If the jobs are making money - then the business is doing well. But just because I make money on jobs doesn't mean I'm hot to trot. Because if I just bought a $65k truck - that monthly payment might ruin me.
After 22 yrs in business and 16.5 years in hardscaping I usually know if each job is on track without a computer. But you need to know on a job to job basis as they're performed because if something is wrong you need to figure out what it is and how to correct it. You could be under estimating materials and or production hrs. Or you may be over estimating, and if you know you're over estimating you may see that you have room to estimate less, offer a more competitive price, and sells more jobs.
I use QB Pro, so I can click on reports, click on profit summary, and see how the business is doing at anytime. I'm pretty good at reconciling the bank statements on a monthly basis and staying on top of the data entry.
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12-14-2012, 11:07 AM
I understand what you are saying. You are looking for ways to lower fixed costs and or how to adjust for higher costs incured. You are also saying you have a good understanding of how long each type of material takes to install and are not really questioning your install times. My problem has been jobs with hardscape/ softscape combined. Example: when I do a small stone wall along with softscape my profitability is good. However; after review i have noticed that when i was just doing the natural stone wall without plants by profiability was not there. In other words the higher margin i made on the plants was covering up my under priced wall. I was leaving money on the table from the natural stone wall. It gets to be tricky when i have 2-3 crews going at the same time.
12-14-2012, 11:26 AM
I think this should be a very strong topic. There are alot of low ballers who think they are doing good by having a full calander but at the end of the year they cannot figure out why they are bairly getting by. I do not think they are trying to leave money on the table but instead lack the abililty track profitability. In my opinion this is hurting our industry more than the condition of our economy. I would love to hear everyones take on the topic of tracking profitability.
12-14-2012, 12:59 PM
I'd love to get into more about profit margins and hardscaping margins vs planting margins - but I have a busy weekend (as always) and probably won't be able to discuss until Monday or Tuesday night. Unless I find some free time late tonight.
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12-15-2012, 07:10 PM
As in other threads again I agree with Dvs. You should not wait ubtil year end to review a job. It should be done as the project is on going. That way if you are loosing money or on track to loose money you can minimize that loss. After the project is complete i review how we finished amd try to make adjustments where needed. At year end again i will review to refresh my memory and develop new systems to increase our profits and minimize losses.
Again if you wait until year end to review you could be loosing money all year long. The nost important thing you need to do is .ake sure you are accurate in your record keeping. Applying all materials all labor (direct and indirect) to each job. We use a PO system for material pick up at vendors, shop materials are removed and tracked with work orders and all labor is extensivley tracked. All of this is entered into the system under a specific job number.
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12-15-2012, 10:28 PM
The toughest numbers to look at are abstract numbers in the background that are truly fixed overhead. When I hear the term "lowball", I generally feel that most of these guys look at the basic numbers (labor+materials+profit percentage = job cost). The very first thing I do every year is review fixed operational overhead. There are many small 5 man businesses that have a $300-500 daily fixed overhead everyday before they ever walk out the door in the morning. This doesn't account for one penny of labor or materials, just EXISTENCE fees. Being "profitable" is a misleading term because it can be interpreted as "whatever the boss gets after paying for the job". The job itself ends up almost being secondary to the fact that you have to build your model around simply being in business.
12-16-2012, 08:31 PM
You could be under estimating materials and or production hrs. Or you may be over estimating, and if you know you're over estimating you may see that you have room to estimate less, offer a more competitive price, and sells more jobs.
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I am an irrigation guy but completely agree with this. With the company I am with now we have flat rate prices for just about everything but that isn't always realistic as the profit margin fluctuates, and as mentioned above sometimes its the difference between getting a job and not. Usually with jobs, especially multi-day installs I try to figure out how much should be getting done realistically perday and track that. Work orders help keeps track of travel time and time spent on jobs. The hardest thing I have yet to figure out is how to factor in time for estimates, like designing a 250K 3 acre landscape. I guess that just ends of being overhead or do you move to a second consultation of paid design. Optional overhead is another issue I have been working with, since time at the shop organizing things or cleaning can get out of hand. just my two cents.
12-17-2012, 01:33 PM
For myself the one thing that I do review at the end of each year is the performance of employees. Without dedicated employees no matter how much work you have lined up or how much you charge, all is dependant on them.
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