Define Your Target Projects and Aim at Higher Profits

The remodeling business is strong, and economists expect it to continue to grow. That’s great news, but are you taking on your most-profitable jobs? It’s easy to take a variety of projects right now, but if you’re not strategic about it, your bottom line might suffer.

If you don’t know which projects make your company the most in gross profits, you might be letting dollars slip away that you could keep.

You’ve got to define your target. Find your project niche and own it. These are the projects you can repeat with success by building on the expertise and experience of your team, and will sail through to the end without hiccups and headaches.

Maximize Potential Profits

Let’s define what your target is and the factors that create it:

  • Jobs that produce a higher-than-average Gross Profit Margin
  • Projects your Production team completes quickly and efficiently
  • Reliably happy clients (who’ll refer more of these projects)

Obviously, everyone’s target is going to be different, and depends on your team, and on your market. You may determine your best projects by price or by type. If your best profit margins come from jobs between $100,000 and $150,000 but anything above $250,000 sees margins lower than you need. Other companies may make their best profits over $500,000.

It may be that your designer can quickly create a kitchen plan and sail through selections with the client and hand it over to Production team, who then execute efficiently and leave the client amazed. It might be that your Production team can crank out an addition profitably.

Yt’s important to figure out what your company does best.

Ready, Aim, Fire

It’s spreadsheet time. Your data will tell you what your Sweet Spot is. Gather your job information for the past year. Here are your columns:

  • Jobs completed
  • Sales Price (Revenue)
  • Gross Profit Margin (%)
  • Gross Profit produced
  • Lead Carpenter or Project Manager
  • The Designer
  • Salesperson
  • Estimator

Enter your projects and data, sort by Gross Profit Margin. Find the similarities in those projects that delivered the highest Gross Profit Margin — size, scope, price range. If the same Project Manager or Lead Carpenter was on the most profitable jobs, you’ve got a rock star on your hands who can help others get similar results. The same goes for the Designer — determine what does he or she do differently and figure out how you can create a system for others to follow.

If the one salesperson sold most of the projects with the highest — or the lowest — margins, learn what was successful and make it a part of the sales process.

Once you crunch your numbers, you’ll usually find a clear answer to what projects reliably produce the best margins, and ones to avoid. This information will affect every part of your business, from lead take-in to Production. With business booming, you can prioritize the types of jobs that will make you the most money, even in an increasingly competitive marketplace.

The Remodeler’s Year End Checklist

End of Year Checklist for RemodelersIt’s that time of year again! Pulling together everything and anything, and getting ready for End of Year!

W2’s; Material Invoices; Payroll Liabilities; Vendor Statements; Reports, reports, reports – Where does it all end?

When I was doing the bookkeeping, I found it very helpful to have checklists to follow, to make sure I wasn’t missing anything important. And End of Year is the most detailed, most important of all!

Thanks to Judith Miller (and QuickBooks Year-End Guide), we’ve put together this End of Year Checklist for your bookkeeper to use. Following this list will make their jobs much easier and more streamlined.

If you have any checklists that you find particularly helpful, please share them in the comments below.

*Members, you can find this checklist and many more in our Resource Library

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Project Sweet Spot: Where Profits Are Easy!

Do you know what what kinds of projects deliver the most profit to your company . . . and do so on a consistent basis . . . and do so with the least amount of headaches?

You should, because this is exactly the kind of project you want to repeat over and over and over again. This project takes full advantage of your team’s expertise. This project maximizes your returns. This is your Project Sweet Spot.

Sweet spot projects are defined by:

  • Those that are produced with a higher-than-average Gross Profit Margin consistently.
  • Those that are familiar to your production team so that they are produced quickly and efficiently.
  • Those that leave a delighted client every time.

Every company that we work with has to individually determine their own Project Sweet Spot. Much depends on their staff. For example, some production teams can crank out pop-top additions at a profit every time . . . but produce lower than needed margins every time they do a job over $200,000. Others love the huge projects that are sold for $500,000 or more and know how to produce them efficiently. Often these companies don’t manage smaller projects well.

Your sweet spot may also depend on your marketplace. The important thing is to know what your company does really well. This information can be invaluable when you’re making decisions on what jobs to go after and what jobs to accept.

Many remodeling company owners think they know what their ideal job is . . . but do they really?

How to find your sweet spot

To find the projects that fit into this money-making sweet spot, gather the following information for all jobs completed over the last 12 months and list them on a spreadsheet for easy sorting and calculations:

  • List of Jobs Completed over the last 12 months. For each job, include
  • Sales Price (Revenue)
  • Gross Profit Margin (%)
  • Gross Profit $$ produced
  • The Lead Carpenter or Project Manager in charge of each job
  • The salesperson who sold it
  • The person who estimated it, if this is different from the salesperson

Create a simple spreadsheet to sort this information. First, sort by Gross Profit Margin. Do you see any similarities in those projects that delivered the highest Gross Profit Margin? How were they similar in size? In scope? Were most of the profitable jobs within a range?

Did the same Lead Carpenter or Project Manager produce the majority of high profit projects? If so, tap into this individual and identify what s/he is doing right that delivers such great results.

Review to see if the person who sold the jobs had an impact. If the one particular salesperson sold the majority of jobs with the highest – or the lowest – margins, learn from the great one and train the person selling the low profit jobs.

When we are collecting data from our Roundtables™ Peer Group Members, we ask them to share their gross profit margins within certain ranges. For example, a typical full service company may use the following ranges:

  • Under $15,000
  • $15,000-40,000
  • $40,000-75,000
  • $75,000-100,000
  • $100,000 – $150,000
  • … and so on.

Then, they provide the average gross profit margin for the projects produced within each range. The information typically points clearly to the projects that the company produces best . . . and which projects should never have been accepted.

Now this isn’t to say that you should only take jobs within your sweet spot range . . . but the information can help you make the best strategic decisions for your company as you move forward. In fact, this is the reason we work so hard with our members to produce accurate information in many areas of the business. The more accurate the information, the better decisions you can make.

What about you?

Do you think know what your job sweet spot is? Did the procedure above support your assumption? Please comment below!

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