Small changes,
big results.
Okay, what I really want to talk about here is is the
power of cumulative, small changes. You don't have to reinvent the wheel in
order to make a big difference
to you bottom line.
Lots of trades businesses
are doing alright
but not great.
And that's very frustrating. And I will help you understand the power here
of...
making different small changes that are more manageable and easier to make
without necessarily (you know) reaching for the sky
and thinking that that's your only option
I'm Jon.
Obviously, I'm from Small Fish Business Coaching.
I run this program called the 'Tradies Toolbox' Coaching Program and
it's for trades business owners who want to grow, and want scale, and want to
make more money.
And part of that,
is using this power,
the small change, and recognizing that you can go make a small change here,
go make a small change there, go make a small change there,
and go, "Oh look, I'm making significantly more money."
I'm going to step you through
a simple example of how this works.
There are a number
of levers that we can pull when
we're looking at what we can change.
And these are just a few of them.
But when we're looking into making more money, let's go with making more money.
Let's go with selling more stuff
at better margins
and making a bit more money.
I'll show you
a little table. I'll work some numbers with you. So imagine right and I've used
(you know don't get too hung up on the numbers here), I've used simple
numbers because I'm simple and they're easy for me to add up and work out.
So imagine you do a thousand jobs a year
and each job in life on average is worth at a $1,000.
You have an average, (because sorry) that gives you a
$1,000,000 of revenue in a year.
And if your average margin is 10%
then your total gross profit is 100,000 bucks.
If your overheads are $50,000
that leaves you with $50,000 in your pocket
to spend
on your stuff. Alright.
Now don't worry about whether $50,000 is a
livable wage or not. I made the numbers up because they're easy to add up.
What I'm going to tell you is, (and show you is), if we make 5%
difference to the number of jobs
and then 5% (sorry), so 5% more,
5% higher average job value
and 5%
better margins.
And make a lot more money.
Watch this.
Here's what I made earlier (it's like...
in breakfast TV). Alright so 5% better, right? That's the one
that I just showed you a thousand, a thousand, a million, 10%,
a 100k, 50k ,and 50k profit.
So 5% more jobs
a $1,050 a year.
5%
better average job value
a $1.,050 a year
makes...
$1,102,500
revenue, right? An extra 100k.
If your average margin is 15%...
then you've got a total gross profit of $165,375.
If your overheads have gone up by 5%,
you've got $52,500 leaving you with $112k. So you've more than doubled
by going 5%, 5%, and 5%.
Now for the pedantic upon you, we're going, "Jon and increasing margin
from 10% to 15%, isn't 5%, it's 50%.
Yeah, whatever." I don't agree.
But I think increasing your margins by 5% is kind of
realistic and reasonable but I'll do this calculation too.
So if you increase your margins by 5% that gives you 10.5%.
So one $115,762.50. So even if...
you're only adding half a percent onto your margins, you're still making an
extra $13,000 on your 50.
Our next... which is what
20%, 25 or something like that, right? More net profit.
They're big numbers. 5%, 5% ,and 5% rolls up quite big
So...
So happy days, right?
Now I'm sure you're all sitting there going, "Yeah Jon but how do we do that?"
And obviously,
you hire a business coach because that's a great thing to do but
you can get more jobs by doing better marketing. And I have a whole heap
of things to say about how you should be doing that (you know). And that's a big
part of my coaching.
But even if you're doing something as simple,
as calling more people up, calling more builders up if you're a subcontractor.
Calling more architects if you're a builder.
That kind of thing. Even if you're only doing
simple things like that because it's cheap,
you can still find more jobs in a year.
How do you get more revenue per job and more average job value?
Well you can charge more.
Put your prices up a bit which also helps with your margins, doesn't it?
And you could also do some upselling. And the big strength of trades
businesses is that you go to someone's site and it's often possible to upsell.
I know a lot of Sparky's and plumbers
and the like, and maintenance type work, who get a
lot of their business
by saying, "Is there anything else you need me to do while I'm here?"
Alright ,the same is true with builders, variations,
and the like if you're project trades
variations can add a little bit to
your revenue per project as well.
And of course you can contribute to better margins. Like I said
by increasing your price, and also by having a good go at you costs
and managing those properly. And negotiating properly on materials,
negotiating properly with subcontractors if that's what you do.
So look it's not difficult. I don't mean to be unreasonable and look to my notes.
I don't mean to be unreasonable with your subcontractors.
Those relationships...
are important but I do mean keep them on the toes, keep them honest,
make sure you're getting fair prices from them
and you're not neglecting that important discipline.
So look I've made a little spreadsheet so you can plug your own numbers in there.
You can go into your Xero, or your MYOB, or your QuickBooks
and work out how many jobs
you do per year. And work out what the average job value is . You
should know your revenue. You should know you average gross profit.
And you'll get these numbers.
And then work out what happens if you increase them by 5%.
Or if that's too scary, stick 3% in and see where you get.
And if you want the little spreadsheet,
message me and ask me for it and I'll email it to you.
And think about how you can go off and make some small changes
that if you make a few of them will make a big difference to you. See you!