Masonry Magazine January 2001 Page. 68
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This forecast is all part of the basic business plan that every owner should sit down and map out when launching and operating a business and re-visit periodically to assess, check progress, and adjust. This should be (as much as humanly possible) an actual dollar amount nothing vague or obscure. The less defined and more general the target, the easier it will be for everyone to loose focus of the goal.
Sometimes, it simply does make sense to "go after one" with the hopes of winning favor (with perhaps a high-powered client) down the road. Higher-profile customers can often cause a contractor to think along these lines.
"The human condition greatly influences our success - more so than in the more finite environment of manufacturing."
If you've got your people busy and it looks like they'll stay that way for awhile there may not be such an immediate need for quite so competitive of a profit line-item. This information will give you a basis for your profit percentage. Call it a "steering mechanism". But, just because you have a profit number doesn't mean your job is complete. Now that you've arrived at an amount on paper, you need to go out and protect it!
NEGATIVE IMPACT
Let's examine some of the do's & don'ts of maintaining a consistent profit line-item. Here are a few common contractor profit pitfalls... accompanied by some suggestions to help lessen (or even eliminate) their negative affects:
• Unexpected problems and miscommunication in the office or field. This is a big one and fortunately (or maybe unfortunately) the remedy to this problem is in direct relation to your ability to manage the job. Problems are going to pop up. Limiting your exposure is the key. Thorough and defined company discipline, increased communication, and careful record keeping (especially when keeping daily and weekly job logs) can greatly help reduce the negative affects that these virtually unavoidable events have on your profit line-item.
• Unreasonable aggressiveness, impatience, and misguided human intuition. This is particularly prevalent at bid time - especially if you haven't hit one in a while.
• Not paying attention to scale. As the dollar volume for the project goes down, the profit percentage generally goes up. This becomes especially important with very small jobs say under $2,000. The logic is simple. It simply doesn't make much sense (unless the contractor has other motivations such as developing new or on-going relationships) to get 10 percent on $2,000 (or $200) when it costs $42 an hour just to leave the office.
• Losing track of the big picture.