Do you know your “Break Even” Point?

Have you ever wondered how much work you need to turnover and at what profit margin to exactly cover your “running costs” or “fixed expenses?”. In other words have you ever accurately calculated the Break Even Point for your business?

If you’re even mildly curious about your “business development” you’ve probably at least thought about your break-even point but maybe you never found the time to figure it out or you never had a user friendly calculator to punch your numbers into and get the result, right?
The fact is if you’re in business and you don’t know your break-even point, then how do you know when you’re making a profit?
Before you start feeling frustrated about this often irritating little detail of business the good news is, that’s all about to change. We’ve created a very simple Free, Break Even calculator to help you calculate the break-even point for your business right now. All you need are some accurate financials, then click the link and follow the three easy steps below to calculate your break-even point in two minutes flat;

Start Here >> Breakeven Calculator

Step 1: Get an accurate copy of your Profit & Loss. Note its imperative that your numbers are as accurate as possible otherwise the result won’t mean a thing. So make sure the income and expenses listed in your P & L are up to date and accurate.

Step 2: Also ensure that you’ve separated your “Cost of Sales” from your “Running Costs” or “Fixed Costs”. If you’re unsure about this, make sure you ask your bookkeeper, and if they’re unsure give us a call we’ll walk you through it.

Step 3: Punch your numbers into the Yearly or Quarterly space on the calculator and hit each of the three calculate buttons to get your Gross Margin, Break Even and Net Profit figures.
Now here’s the thing, once you’ve calculated your break-even point, you can play around with the numbers and gauge the result to your bottom line when you shave 2% of your Material costs and/or increase your pricing by 4%. Also use the top part of the calculator to work out your Gross Margin on individual jobs and find your most profitable work. Chances are, 80% of your profit is coming from 20% of your work.
Have fun!

Should you be charging for quotes ?

If you are already charging for quotes, congratulations you “get it”, so no need to read any further. Otherwise for a question that’s bandied around now more than ever, here’s my take on the situation.

The short answer is YES, you should be charging for quotes, especially if you do itemized quotes or D&C. Now you’re probably thinking, but Kurt my competitors aren’t charging for quotes so how am I going to get any work, especially when the phone has stopped ringing! If this is you then you’ve got a marketing problem and that’s a whole different conversation, which incidentally needs to be had before you start charging for quotes. (See our article on how to generate a continuous flow of profitable work to sort your marketing out).

Remember your Marketing should position you as the expert, the “go to” person in your chosen “Niche” or specialty. Once you have this positioning securely in place you can plug your sales process into the back end. With sales being the biggest area of “inefficiency” in this industry (i.e. lots of quotes done for too few contacts signed) the number one purpose for your sales process should be to QUALIFY your prospective clients. Handling your inquiries correctly protects your time and let’s your potential client know how you do business. Handling them the wrong way gives them the opportunity to waste your time.

So here’s a scenario where even if you don’t intend to charge for quotes, you definitely should be. Bearing in mind the aim of the game here is to “qualify” the prospective client. So lets say you get a call for a Reno, first floor addition, bathroom whatever. You show up at the appointed time to speak with the nice people about their proposed job. At some point in the conversation, the potential client makes the following statement: “I want a complete itemization of your proposal and when it’s ready you can just send it to me by email or snail mail. “?How do you, or did you, respond? If you’ve been in business a long time, you’ve had this happen. It’s critical to know how to respond to a super-controlling prospective client. Let me share a response that keeps you in charge of the situation but also allows the client’s ego to remain intact.

The sooner you let the potential client know how YOU conduct business, the better. In fact this should happen during the “Pre-Sales “ process when you send them your profile and clearly outline the YOUR process for doing business with them. You start that part of the conversation with, “Mr. and Mrs. Prospect, let me tell you how we work, Itemization of any kind takes a lot of extra work and I’m happy to do it, as long as I’m paid for that service. When I work, I like to be paid for my time just like you do. We charge $65 an hour with a minimum of 4 hours for any itemization we do. I think that is fair, don’t you?” their response will tell you if they are interested in a win-win business relationship or if they are going to be a classic P.I.T.A!

Now, if they start asking about your margins, then you know it’s time to walk. No need to get involved. Do they ask their doctor, attorney or dentist for an itemization? Do they tell their doctor what price they will pay? How about the manager or check out person at the grocery store? So why do they think they are entitled to that information from you? You can try to explain if you wish, but you are dealing with a potential client whose single focus is getting the lowest possible price for their work. Let another builder or contractor do the job, you don’t need it.

As far as sending a quote by email, snail mail or fax, that works for order takers. Order taking requires the lowest price, and that’s not where you want to be, especially as an expert in your field. If you don’t want the work, email your quote.  If you want their business, inform them that when you go to the time and effort of compiling a quote, you want to sit down with them to review the proposal and ask/answer any questions they might have. If they aren’t willing to do that, they don’t want to make a decision and will try everything they can to avoid it. Politely tell them that you have their information and when they are ready to review their job with you and make a decision, you will be glad to come back and go over the job details and your quote for their work. You will unmask the real clients REAL quick with this approach.

Is this ballsy? Is it rude? No, it’s setting the standard under which you are willing to work. Remember if you don’t set it, the prospective client will. The prospect is either at the mercy of your process for selling or you’re at the mercy for their process for buying. It’s your time to do with as you will, but why let some inconsiderate knucklehead waste your time? As a business owner and leader in your community, you must learn to guard your time as you would your life, and insist that others respect your time. That way you can focus on the clients you can do business with, not the clients who want to waste your time.

Woody Allen famously remarked that 50% of success was “showing up.” Too many people stop there, and get 50% of what they could – if they showed up as a real Pro. Alert. Prepared. Practiced. Primed in every way to deliver an extraordinary performance, they’d get extraordinary results. In fact following a well defined sales process and professionalizing yourself and everyone in your business might just be the best way to b

Be prepared to make those decisions

I frequently see the debilitating effects a seemingly big failure has on a persons psyche and decision making ability. When we fail at something that we had big expectations for, we can end up depressed. At this point many of us beat ourselves up asking questions like, “what did I do wrong?”, “Why didn’t it work?”, “Why did this happen to me?” with these and other self deprecating thoughts running though our mind we often render ourselves “decision-less”.

I had a private client who was so overwhelmed with his own impending financial ruin that he couldn’t get out of bed. When I eventually drove down to his office to meet with him we discovered he had enough capital to keep the doors open for another five weeks. He was faced with a major decision; either he closed the doors or he picked himself off the floor and threw everything at turning things around. Fortunately he chose the latter and together we were able to pull things out of the fire.

When things go “pear shaped” it doesn’t pay to sit around for too long wondering what happened and beating yourself up. A wise man once said “Failure should be our teacher, not our undertaker. Failure is delay not defeat. It is a temporary detour, not a dead end.”

The truth is no one has exclusivity on a difficult time. We are all either in a crisis, coming out of a crisis or about to go into a crisis. That’s life, shit happens! I often tell young blokes just starting out in business that the reason many builders and contractors fail is that they don’t make timely decisions. They know when facing a challenge that a decision needs to be made. They know they need to make a change, or they need to do something different, but they just can’t or won’t make the decision to do what needs to be done.

The hallmark of great leadership is the ability to make a decision. This is simply a discipline thing. The well known Personal Development mentor Brian Tracy has an excellent method for dealing with decisions. Make up your mind that you are going to mentally handle a necessary decision. Once. When something tough comes up and you need to determine the course of action you should take, stay with it. Handle it once and force yourself to make a decision. You have at least a 50 – 50 chance of getting the decision right the first go around. 50 – 50 is pretty darned good odds of getting it right.

If your decision doesn’t look like it is working, then make a correcting decision. This time you know more, so it’s more likely to be the right decision.

If you find decision # 2 is still off course, then again make the necessary decision to change your course. Don’t wait, make the change. As the old saying goes, third times the charm. Your third decision will almost always put you on the right path.

Not making any decision is making the wrong decision – especially if change is necessary. You’re probably facing a few important decisions in your business right now. Remember to exercise your free will and be decisive. We are getting many calls from builders and contractors who have business challenges and don’t know how to solve them. Unfortunately a lot of the challenges I see are self-inflicted due to the avoidance of making tough decisions. If you are having problems and would like to bounce a decision off us, give us a call. Doing nothing adds to the dilemma you are in and will not solve the problem. Make a decision, get it straightened out so you and your business can move on.

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