Let me share some thoughts from our first Bi4Ci User Conference, sponsored by ProSource. We had one elephant-size objective: Help companies find five 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 $5%+ in additional profit…
Three strategies were the personal winners for those attending:
Raise parts prices on every project by 4 percent of revenue (if you are less than 7 percent total revenue today, you can).
Enforce every bid over $20K to a minimum of 35 percent of the total bid amount being. Stop believing your proposal tool; it falls short on too many jobs.
Find two 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 eight hours for every eight 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 percent of Revenue
ii. Top-line Gross Margin (revenues less what you pay for parts and equipment) should be 65 percent. 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.