Getting to the end of the project to only realize that your profits have been cut.
Yeah, that sucks.
In this video, I'm sharing three things with you that includes deciding on your profit
margins, as well as protecting your profit margins.
Are you ready?
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One of my clients used this same strategy or information that I'm going to be sharing
with you guys today and knocked it out of the ballpark to the tune of millions of dollars.
Hello.
Here's the deal.
If you're probably in my community watching my videos, you are a for-profit business.
Am I right?
So what does that mean?
You're here to make money in your business.
And so, you need to make sure that not only are you making money but your business is
profitable.
That is the goal.
So let's dive in.
I have three steps to deciding and protecting your profits.
I want to share with you, and I have my notes because I want to give you some definitions
today, what is profit?
So I want to define profit for you, if that's all right, and bear with me.
All right, so profit is a financial gain.
I never take for granted who I'm speaking to and where you're at, what level you're
at, so I want to make sure that you get the basics down because it's very, very, important.
What is a profit?
A profit is a financial gain, and it's what's left over after expenses.
So, it's the difference between the amount you earned minus expenses.
What does that mean?
What I'm saying is, when you complete a project, they deposit the money into your bank account,
or however you get it into your bank account.
Whatever you charge them, they put that amount into your bank account.
Now, theoretically, you don't get to keep all of that because you have expenses associated
with the project.
You have the money come in, and then you have to deduct, subtract, take away the expenses.
And then, what you have left is your profit.
Now, number two, what is a profit margin?
Profit margin is the revenue from sales that exceeds your business expenses, which I just
gave you the formula just previously, right?
It is your revenue from sales that exceeds your business expenses.
Now, let me share with you some of the things that can negatively impact your profit margins
beyond your expenses that you've accounted for already.
One of the things could be increased cost.
Maybe the vendor gave you one quote and then by the time you go to order it the price has
changed, especially if they don't give you where they'll hold the price for so many days
and things like that.
So, increased cost in your cost of goods sold could be an issue.
Delivery schedules could put you behind on a project.
If they can't deliver tools, products, whatever it is you need for your project as scheduled,
then it can put the whole schedule behind, which can in turn affect your profit margin.
And then, the other thing is just going over schedule.
If you have a schedule to adhere to, to complete a project, so for example, if you said you
will create or complete the project, say, in five days, and it winds up taking 10 business
days or 15 business days, so now you've went over on your schedule.
It's definitely going to impact your bottom line profit.
Because initially, say you accounted for five days, so you accounted to have the workers
for five days and pay them X amount of dollars.
Well, if it went over 10 days, times it by two.
So now, you just lost five days worth of expenses, and that is being taken away from your bottom
line profit margin.
You always want to be very, very, careful with your schedules and definitely be monitoring
your cost as well as the schedule.
So, you always want to be monitoring the cost as well as the schedule.
As your project is ongoing and you're spending maybe to get things, pay people, whatever,
you need to have a pause on that spending, and a cost on production, or services being
provided timely and that kind of thing, to make sure it's not going to affect you, and
as I said, come back and bite you in the butt, when you start looking at those end numbers
of your project.
I want you to comment below and let me know, are you...
How do I want to say?
Are you happy with your profit margins?
Whatever profit margin you're using currently in your business, are you happy with that?
And, from month to month, if you have consistency in your business, the question is, is your
bank account growing?
Have you looked at it like that?
I don't mean you're draining the bank account every month.
I'm talking about, is the bank account growing?
Money is accumulating in your bank account.
And then, answer the question.
What was the question?
Let me say it again.
Are you happy with your profit margins?
Let me know down in the comments.
Okay?
All right, so I have one last thing on profit margins before we wrap this up today.
How do you decide your profit margin?
I know this is a question I get asked quite often and people say, well, what should my
profit margin be?
Again, I don't know.
Here's the thing, like I said in the previous video, if you can't price your projects, you
have a problem.
Now, I can point you in some areas and some things to look at to determine your profit
margin, that you're going to use that percentage.
But one, I would never tell you what to use, first of all.
It's your business, and you need to make decisions as a business owner.
I'm not going to hold that space for you.
That's your space.
You hold it.
I handle that in my business.
If you want to be a business owner and step up into that role of the CEO of your business,
then you have to decide what your profit margins will be.
Now, how do you decide that, I can give you some things to look at, and that's what I'm
getting ready to share with you now.
One of the things is you can definitely look at industry standards based on what you're
doing.
What are other people charging as profit margins?
Now, there are some pieces of that that we could really dive into, but not here right
now, because that'll be too deep for you guys.
Just think, in general, what are the industry standards?
And then, also, you need to know your numbers that will help you in deciding what the profit
margin needs to be.
When I say, know your numbers, I'm talking about your expenses and things like that,
which we talked about in the video from last week.
If you didn't watch it, I'll put the link down below, go back and check that out as
well.
You also need to know what your expenses are, not only for the project, but your business
expenses in general.
Because, when you're just starting out, one of your goals should always be to get to a
place in space where your business can not only support the business expenses, but it
can take care of you personally as well.
That's when you've arrived.
Because, I know some of you guys are still in your jobs and you're doing this on the
side, not knocking anything.
I started that way too.
You have to get to a point to where your business can take care of you so you can quit your
job, if that's your goal.
And then, the last thing is you need to know, and you really have to be clear on this, is
your project cost.
Project costs and your expenses associated with the project, you have to know those numbers.
And then, you need to know your overhead expenses in your business as well.
You can also look at historical data.
If you're good with numbers, you may be able to figure out profit margins that way as well.
You have to figure out what profit margin you're going to use.
And, you can definitely start with industry standards.
That's a great place to start in determining profit margins.
And then again, the other costs associated with that, that you need to be mindful of.
So there you have it.
The numbers you need to know in order to come up with your pricing, the numbers you need
to know, and the numbers you need to include in your pricing so that you can protect your
bottom line profits.
Remember now, if you can't price right now, okay, the first thing is being aware and saying,
"Hey, I need some help with this pricing and profit thing."
That's good.
Learn how to do it.
But now is the time.
If you're bidding opportunities, if you're doing work, you need to know these numbers
so that you can assure, one, that you're covering your costs.
That's an ugly feeling to have if you do a project and you didn't even cover your costs.
Definitely, you didn't get any profits, but you didn't even cover your costs.
Now, you're coming out your pocket to do a project.
That's not cool at all.
You definitely want to make sure you're able to do that.
If it's a problem for you, fix it.
It's okay.
Realize it's a gap.
Realize there's some missing pieces, find out what they are, and fill them.
Put those pieces to the puzzles together so that you can price and profit on your opportunities.
Now, if you need help with that, definitely you can check us out inside the Contractor's
Edge Bootcamp.
Again, in module three, Bid and Profit, we got you on this.
There's a bid formula in there, everything waiting to help you in profiting on that next
opportunity.
Now, in there, you're also going to get my first bid done fast formula.
It's really, really, cool.
Definitely just check it out.
If you want help with it, I put the link down below, feliciastreeter.com/bootcamp.
If you need help with bidding and pricing, profiting on projects, come join us.
One other thing before we wrap up, definitely if you're digging what I'm putting down, definitely
hit the like button.
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All right, so until next time, I'll see you right back here real soon.
Bye for now.