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THIS IS THE SIMPLE WAY TO INCREASE CONSTRUCTION PROFIT MARGINS
THIS IS THE SIMPLE WAY TO INCREASE CONSTRUCTION PROFIT MARGINS
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OF COURSE YOU WANT TO MAKE A PROFIT, BUT…
The problem most construction business owners encounter when implementing the PFC 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.
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The Built to Build Academy creates confident construction business owners through business training and mentoring programs so that you can build the systems in your construction business to make more money, stop worrying, and get your life back.
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Rule number three of profit first for contractors, is this. Start small. In fact, I want you to start so small, set a goal so small it’s impossible not to do. See, profit first for contractors rule number three is not only the starting point of the system and in learning how to increase profit margin in construction, but it’s also the key to implementation.
Listen, you’ve got to crunch the numbers. You’ve got to know what you need to be charging for your construction business. You got to work for the right clients, and there’s a lot of work to do, but you don’t have to have all the numbers figured out in order to start. That’s why rule number three is so important.
So just like we say in the book, you open up a profit account and transfer 1% into your profit account, and that’s where you start. And until you crunch the numbers, you just keep bumping up that percentage by 1% every three months. So for example, you didn’t make any money last year. Well, we’re going to change that by 1% right now.
Then three months from now, you’re going to bump up your profit distribution by another percent, to 2%, and three months after that, every quarter, another percentage, and slowly and surely over the course of a year, you’re going to be four, five, 6% by the end of the year and it’s going to transfer, it’s going to transform your construction business. So do that. Profit first for contractors rule number three, start small. Not only is it the starting point, but it is also the key to implementation.
Listen, if you need some more coaching, you need some training on building other systems in your construction business to make you permanently profitable, you want to grow your construction business so that you have sustainable, profitable growth? You need to enroll in the Built to Build Academy, so go to builttobuild academy.com and join the wait list.
The Built to Build Academy creates confident construction business owners through educational training and mentoring programs. We’re going to help build the systems in your construction business that are going to help you make more money, going to help you stop worrying, and we’re just going to give you your life back. So we only open enrollment every so often in the Built to Build Academy, so go builttobuildacademy.com, join the wait list, just answer a few questions. We’re going to send you some more information about the open enrollment period that’s coming up very soon. So stop worrying. Let’s make you some more money. We’ll get you your life back at the builttobuildacademy.com. See you soon.
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Shawn Van Dyke is a construction industry consultant, business coach, and mentor to construction business owners. He is a Brand Ambassador for Fine Homebuilding, travels across the US as a keynote speaker, seminar presenter, and the author of two books – Profit First for Contractors and The Paperwork Punch List: 28 Days to Streamline Your Construction Business.
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