Built to Build: Blog
THIS IS THE SIMPLE WAY TO INCREASE CONSTRUCTION PROFIT MARGINS
OF COURSE, YOU WANT TO MAKE A PROFIT, BUT…
The problem most construction business owners encounter when implementing the Profit First for Contractors system is that they try to go too big, too soon.
They get excited about finally knowing how to increase their profit margin in construction and making a sustainable profit, and allocate a large percentage of their current revenue to their newly established Profit account.
The problem with starting big is that it’s not sustainable.
The Profit First for Contractors system is simple. That’s why it’s so effective.
That’s why PFC Rule #3 is: Start Small.
STOP STEALING FROM YOUR CONSTRUCTION BUSINESS
If you’ve never made a profit in your construction business, and you start allocating a large percentage of your revenue to your Profit account, then you will develop a bad habit of dipping into the Profit account to pay your bills.
HOW TO INCREASE PROFIT MARGIN IN CONSTRUCTION PERMANENTLY
That’s why Rule #3 is so important.
Starting small is not only the first step in learning how to increase profit margin in construction, but it is the key to achieving permanent profitability.
Here’s how to start and maintain your Profit First for Contractors system:
- Set up a Profit account, and move 1% of your bank balance to this account.
- Determine the recommended Percentage of Total Revenue (PTR) for a healthy construction business based on your Initial Assessment.
- Increase your Profit allocation by 1% each quarter until you reach the recommended PTR according to your Roll Out Plan.
- Increase your Tax allocation by 1% each quarter until you reach the recommended PTR according to your Roll Out Plan.
- Increase your Owner’s Comp allocation by 1% each quarter until you reach the recommended PTR according to your Roll Out Plan.
- Decrease your OPEX (Operating Expenses) allocation so that all your account PTRs add up to 100% (see PFC Rule #1).*
*Note: A decrease in the OPEX PTR doesn’t necessarily mean you will have less dollars in your OPEX account because you will be increasing your efficiencies and margins by running a better construction business.
START WITH 1 % OF YOUR CONSTRUCTION INCOME
You don’t have to fully understand all your financial statements or re-vamp your entire construction business to start implementing your Profit First for Contractors system.
You just need to start.
Start small with 1%.
PFC Rule #3 is not only the starting point, but it’s also the key to making your construction business permanently profitable.
Start with a goal so small it’s impossible not to do.
Four to six quarters from now you will have a completely different construction business.
Get started small now.
DO YOU NEED TO CREATE PURPOSEFUL, PROFITABLE, GROWTH FOR YOUR CONSTRUCTION BUSINESS?
Then, you need to enroll for The Built to Build Academy®.
It is going to give you your life back.
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