Experiencing the impact of COVID-19 as a business owner is like a slap in the face that never stops playing out. You didn’t see it coming, its impact is shocking, and its sting is reverberating. At some point recovery will happen. While we’re all waiting for that moving target to appear, the best advice for now is to prepare your business for success on the other side.
Evaluating your current business by asking the right questions, doing the internal research, and assessing your data can help prepare for a re-emergence that’s stronger and possibly more profitable than its pre-COVID status. Melanie Hodgdon, president of Business Systems Management and a consultant and coach for contractors, provided an insightful business resource, aka SWOT analysis on steroids, in a recent issue of remodeling magazine. Here’s a summary:
What has been your company’s profitability trend as measured by achieved gross profit margin and net profit? (Produce a P&L by quarter for the past one to three years.) If profitability’s stable and you’re happy with the amount you’re making, great! If it’s improved, congratulations! If it’s sliding, ask yourself why.
What jobs are making you the most profit? A question to be refined for each company. For example, if you’re a full-service remodeler, you may want to start analyzing jobs based on the nature of the work (for example, kitchens vs. baths); if you’re a specialty or replacement contractor, it might be more valuable to look at job size (decks under $50,000 vs. decks over $50,000). Slice and dice the data any way that seems relevant.
Investigate production strengths and weaknesses. The trick is to evaluate each task. For example, if you’ve been canny enough to track labor by categories (framing, trim, flooring…), now is the time to figure out what tasks are coming in on budget (time and dollar), and which aren’t. This also opens up the question of where the problem lies: Is the estimating totally in left field or are your production workers falling short of reasonable expectations?
Whose jobs are the most productive? If you use lead carpenters, supervisors, or project managers, whose jobs are the most productive as measured by timeliness and profit? Any system in which responsibility is assigned to an employee should have within it a process for review and reward.
Analyze the most appropriate employee to sales ratio for your company. This simply means going back and calculating the number of sales dollars that came in as measured by employees.
Where should sales be coming from? Your sales are probably built on a mix of marketing efforts and referrals. Referrals are your cheapest source of work since there’s no direct outlay of money to get them, and the prospect sees you as “pre-approved” by their friend or relative. Why not mine this resource more fully? In terms of marketing, do you have good information on what avenues have been most successful for you?
Take time for comparison shopping. Whether it’s a supplier or your insurance company, when was the last time you comparison-shopped rates or reviewed your history with the company?
Investigate refinance options. With interest rates dropping, if you have mortgages or loans, now might be a good time to investigate refinancing.
Review company documents. This is an excellent opportunity to review your company’s paperwork. Look at your last project contract. How could it be improved? If you’re not sure, download some sample contracts or consult your lawyer.
Times are uncertain. When there’s time to prepare, take it. Read the full article here.
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