Making job profit on every job is important to make a profit and cover your business overheads and administration.
In the world of Building and Construction, there are many types of tradespersons who operate small businesses in Australia.
Some people are great trades person but not always running a business.
Amongst the construction industry, there are those who can run a successful business, those that can make a living but not much else and those that lose money and should not be self-employed!
Making a profit is an art and takes some understanding of your trade, what the market will bear and the cost of the ingredients it takes to make the end service product or project. Might at this stage also throw in mess ups where you have to fix a problem caused by not doing things right!
Yet many don’t take the time to get it right. They rely on their gut and this leads to losses and cash flow problems.
Good habits help makes job profit
Get into the habit of examining every job and take the time to understand costs vs profit. Understand what work you should continue you win and which jobs you should work away. Look at the labour on job and was it efficient or were there defects that required additional time and loss of resources that could have been spent elsewhere?
There are tradies out there that use the back of enveloping approach For them this works only because the price quoted is well above the odds. Often it also leads to low margins and has the reverse impact on profit.
There is no excuse these days with the sophistication of accounting software that you cannot monitor these jobs properly.
Cloud accounting software
Accounting software such as XERO and MYOB can help you track jobs. A good accounting system can tell you the result or ongoing costs of a job.
There is also specific job costing software that is functional and affordable for smaller trades.
A final tip that many trade businesses neglect to do is while they measure their results on a job to job basis they forget to keep the score of the annual year to date result. This is where you may make a profit in a job but with insufficient margin, your administrative overhead can dilute your profit quickly with undesired effects of cashflow and taxes being unpaid.
Don’t fall into the habit of not looking at the big picture not just on a job to job basis. Practical ways that some tradies ensure that they make a profit on a job is to :
- Add 10% to cover for incidentals
- Throw in a couple of thousand to make it worth while
- Use a professional quanity quote service
- Compare othe jobs you have done
- Ask other tradies as to what they quote
Plan your quotes, do the job and review the outcome. A good business will make nice profits and when you get the taste for profit it becomes something you strive for do better and this is a nice feeling to enjoy