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
- $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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