Do You Have a Profit Plan?

sarahBy Sarah Goldberg, Senior Account Representative, Backroom Management Services LLC

What if you could start every job with the absolute knowledge of exactly how much profit you’ll make when it’s complete?  Sounds like a fantasy, doesn’t it?  After all, there are so many things that come up or change in the course of a construction project, that no builder or contractor can know to the penny how much they’ll clear until the project is complete.

But you can get very, very close by building a Profit Plan.

Your Profit Plan is the promise you make to your customer about what you will charge, AND to yourself about what you intend to make.  By creating a profit plan of your intended incoming and outgoing cash before you begin a job you can measure and monitor your progress each step along the way to your final promised profit!

Once the job begins simply follow your profit plan like a map, keep your promises and adjust as changes and challenges present themselves.

The Starting Point:  Accurate job costing.

foundationWithout a good foundation you are essentially running a job blind.  Whether you call it bidding, estimating or budgeting, building a Profit Plan is the first and most critical step to making a profit on every job.

Are you still building each new estimate from scratch?  If so, then you’re likely relying on guesswork for too many of the numbers you commit to.  A guess is not a promise.  Instead, create templates and modules with accurate pricing that can be kept up to date and used for every new estimate.

Job costing software, such as CASHFLO™, allows you to easily build and maintain templates. Pricing templates show you specific costs – “pricing promises” from vendors and contractors you can hold them to and use to create a clear and accurate final estimate.

‘Detours’ on your Pricing Map

Of course, estimates are rarely perfect.  Changes and even some surprises can pop up that affect your original estimate.  Some common detours are:

•    Change orders
•    Scheduling issues
•    Vendor recalculations

While you can’t anticipate every change or issue, you can plan for them by how you structure your estimates and agreements.  And as importantly, you can manage them with your job costing software.

For example, CASHFLO™ allows you to compare every vendor and contractor estimate with the actual invoice before you make payments.  That way you can see and verify any variances and make sure everyone is keeping their promises.  The software also lets you price change orders accurately and make sure they are added to the billing schedule.

Financial management of your projects and business as a whole can be simple and clear when you use a proven tool like CASHFLO™.   Our job costing software includes, change order management, change order alerts, and ongoing updated scheduling all in one system. Spend 5 minutes a day and know exactly where you are on your Profit Plan on every job.

Learn more about CASHFLO™ Job Costing for Builders and Contractors here.