Canadian Contractor - July-August 2015

FINANCIALS
Hopefully that number is not only above zero but it equals how much money you want to make
over the next 90 days. If it does equal what you want to make, then your next step is to follow
your plan.
Let’s take a look at what you can do if the number is not as much as you want to make in the
next 90 days. First, I would suggest taking a look at your overhead to see what overhead items
you could eliminate that would not impact your ability to produce the work that you do. Once
removed, if the number is still not what you want to achieve, then the next step is to look at the
work that you are planning to produce. There are only three possible scenarios here. Either (1)
you are not producing enough work in the next 90 days, or (2) it is costing you too much to do it,
or (3) you have a combination of both.
At this point you will need to review the project plan to find out what can be done to increase
production over the next 90 days. Look for areas of inefficiencies, areas where you could put
multiple trades on-site at the same time, hire someone who can work faster or has larger crews
that are able to produce more work in the same amount of time than someone you have worked
with in the past. These may be tough decisions, but if the crews you have now can’t produce
the work that you want then you might have to look for other crews. Are you willing to let your
current crews stand in the way of you reaching your goals or are you going to take action to help
you reach them?
Take a look to see what options you have to reduce the cost to do the work without sacrificing
your quality standard. You could look at doing a better job procuring material, shopping at
different stores and using suppliers who can provide shipping to cut down on wasted time
picking up and delivering materials to site. When I go to a building supply store during the day
I am shocked at how many times I see two people from the same company walking around the
store picking up materials or components that they forgot to get the time before. Better planning
of the job can save a ton of time wasted going back to pick up more supplies.
Research new products and technology that can make the job go faster. Make sure clients
have made critical decisions that they need to make so that they don’t hold up the job. Any time
that can be saved will help you produce more work in less time. More work means more money.
The Break-Even Analysis
If you still aren’t reaching your goals, you need to do a Break-Even Analysis to determine where
you stand. If your revenues don’t support your expenses, you will get in trouble very quickly.
Using the same numbers we used to determine your profitability, here is how you calculate
break-even.
Month 1 Month 2 Month 3 Total
Overhead Expenses $8,000 $8,000 $8,000 $24,000
Divided by Gross Profit % 30% 30% 30% 30%
Break-Even Revenue $26,667 $26,667 $26,667 $80,000
If you do all the things we just spoke about and you still won’t hit your goal, then it sounds
like you need more sales. That is a whole other topic to be covered in the next issue of
Canadian Contractor. cc
Mike Draper is vice president, coaching, at Renovantage.com