15 Finance Tips Successful Contractors Don’t Ignore
Kyle Hoffman of Roofing & More Inc. recently led a talk on contractor finances in our webinar, Inside a Business Owner’s Mind: Secrets to Running Your Business by the Numbers. In it, he talked about how tracking key business numbers can help contractors gauge the financial health of their companies.
Here are some more finance tips that can mean the difference between barely breaking even and making a good and sustainable profit.
Materials & Equipment
(1) Invest in quality up front. Buying cheap when it comes to equipment and tools is shortsighted. You’ll only end up spending more on replacements.
(2) Lease or finance new equipment if necessary. If your working capital isn’t enough to buy quality, don’t compromise! Spreading the cost out over the years makes better financial sense.
(3) Comparison shop. Even if you work directly with big-name brands, it’s smart to shop around for the best deal on materials and equipment. Your supplier may even be willing to meet or beat it.
(4) Ensure timely ordering and delivery of materials. You may face additional expenses if materials are ordered too early (storage, damage, losses) or too late (expediting).
(5) Take inventory on the jobsite. This is best done before and after each use to reduce the risk of unreported damage, disarray, loss, and theft.
(6) Schedule smart. Take factors like job progress, weather and individual worker speed into account to avoid having too many or too few workers on the jobsite.
(7) Manage productivity. Set key performance indicators (functional units per labor hour) to measure individual and overall productivity.
(8) Track productivity trends. Analyze your production stats month-over-month, year-over-year and against industry standards.
(9) Front-load contracts. Ensure job contracts are set so that you receive bigger payments earlier. You should not be paying out of pocket to complete a client’s project.
(10) Schedule payments based on percentage of completion. Payment schedules should be based on percentage of completion and tied to readily identifiable milestones.
(11) Incentivize faster payment. When offering a discount, make it high enough to make clients want to take advantage of the chance to save money.
(12) Penalize late payment. As with incentives, any penalties should be high enough to make clients take notice.
(13) Track your numbers. Keep a close eye on your business income and cash flow by creating P&L statements. What gets measured gets managed!
(14) Reverse-engineer your prices. Don’t just look at what the competition is charging; price with profitability in mind. This goes back to knowing your numbers.
(15) Invest in technology. Tools like electronic payment systems and enterprise cloud software can help you stay on top of your expenses and avoid surprises.
We hope these tips will help you increase margins, improve cash flow, operate more efficiently and ultimately become a more financially sound business.
Marketing can play a big role in improving business efficiency, and Surefire Local has tools that can help business owners really put their hard-earned money to work. With the Surefire Cloud, instead of putting your marketing dollars into a black box and wondering what will come out, you get a clear look into what you’re spending, where it’s going and how much business it’s bringing back.
If you’d like to learn more or schedule a demo, call 888-804-8685 or email firstname.lastname@example.org.