Does it seem like you get a lot of calls, but just don’t make the kind of profit you expect?
Focusing on improving your profitability can pay dividends for your business. Whether you’re a general contractor, an HVAC contractor, or an electrician, these five tips will help make your company more profitable:
1. Focus on the Most Profitable Jobs
Step one is to make sure you have a system in place that allows you to measure every job so you can determine which type of job produces the most profit for your business? Tools like QuickBooks Online enable you to predict an average profit for each type of work you do. One way to get started would be to divide your jobs into relevant categories. For example, if you’re an HVAC technician you might categorize your jobs by:
- Type of job – installation, repair, or regular maintenance.
- Type of system – furnace, air conditioner, fireplace, etc.
- Type of repair – major, minor, emergency, etc.
- Building type – single-family residence, condo building, commercial building, etc.
- Location – with 10 km, 50 km, 100 km, etc.
In addition to revenue, look at the time spent on each type of job as well as any expenses (equipment, travel costs, labour, etc.) Once you have analyzed this information you can focus your marketing efforts on bringing in more of the jobs that make you the most money.
2. Offer Maintenance Contracts
Wherever possible a goal for every business should be predictable income. In other words, having consistent recurring revenue you can count on every month or every year. Although, not all home services businesses can offer maintenance contracts, if you can, then you have the opportunity to build a steadier supply of income for your business.
If ongoing maintenance contracts are a possibility for your firm then train your team to upsell clients on a maintenance contract when completing the initial install. This strategy is a win-win. It helps you and it helps your customer too, as regular maintenance will help them extend the lifespan of their product and give them some peace of mind. As you forecast your revenue and expenses, make sure to take into account that for the first several years, maintenance check-ups will be straightforward and quick, however they will eventually take more time and result in repairs and replacements, which will generate more income down the road. At AIS Solutions we’ll show you how to use QuickBooks Online to accurately forecast revenue from maintenance contracts.
3. Reduce Marketing Costs
How much do you spend to acquire a customer? Paid advertisements are useful in the short term but also expensive. Long-term strategies like search engine optimization for your website and content marketing can payoff but it’s more difficult to show their direct return on investment (ROI). Referrals from existing customers are absolutely free when you motivate customers to offer them. There are many tools you can use to track your marketing leads so that you can determine the ROI of your marketing efforts. With this knowledge you can adjust your marketing strategy and spend, to maximize effectiveness and reduce costs. Doing so will help you pay less to acquire more new customers.
4. Create Accurate Estimates
Home improvement and construction-related projects require individual estimates because each project is typically unique. Inaccurate estimates can cut into your profit margin, but what’s worse, they can cost your client and damage your company’s reputation. Take the new Berlin airport, for example. According to AP News, the original cost estimate for the airport was €2 billion. In October 2020 the airport finally opened, 9 years late and at three times the estimated cost – the project topped over €6 billion! In addition to costing German’s tax payers, the project also cost Berlin’s mayor his job.
Accurate estimates are critical to the success of your business. With a sound accounting system like QuickBooks Online in place you’ll have the data you need at your fingertips to know exactly how long certain jobs take and how much they cost. You’ll even be able to predict exactly how much you need to pad time and costs to ensure you’re covered if there is an unexpected problem.
5. Save Time on Accounting
Time is money, and the less time you spend managing your accounting and doing paperwork, the more you can spend on generating high-quality leads, completing jobs, and growing your business. Using QuickBooks Online more efficiently can help your team save valuable time that you can use elsewhere. Tools that integrate with QuickBooks, such as Knowify and Cash Flow Tool can help streamline many other parts of your business, too, including invoicing, payments, payroll, and more. Each of these tools is designed to help either save you time, increase your profit, or both.
We specialize in helping contractors and home improvement-related businesses. We utilize our 20 plus years of bookkeeping experience, our awesome team of professional bookkeepers and cutting edge technology to help make your firm more profitable and more efficient. Contact AIS Solutions today to learn more about our customized bookkeeping solutions for your business.