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.