Start with the end in mind!
While efficient production makes you money, your ability to make a good profit doesn’t start there. It starts at the sale.
There are two main ways to control profit through your sales:
- Setting a realistic sales goal (billable hours goal) so you can safely cover your overhead.
- And by selling each job including enhancements/change orders for a profitable amount.
This is why sales compensations should be tired to these two goals. Hitting a high net profit (say 20%) does not happen magically. It must be budgeted and sold that way to ultimately land (after bad weather, delays and hiccups) at the net profit goal you want.
To do this requires a professional approach to:
- pricing the work
- negotiating with the client
- estimating accurately
- managing the client expectations to match quality, hours and price
- selling work that can be efficiently built
- having a process to prevent buyers remorse
As an aside, when you present your price or price range to your client, be prepared for push back, have it built into your price, i.e. don’t give away your net profit in the negotiation.
Your challenge. Start with the end in mind. Build your budget from the bottom up, answering “How much net profit you want.” Then build your budget, pricing and sales staffing and strategy to achieve your goal.
Your entire organization will succeed in hitting it goals, production incentives, and profit sharing, if you embrace the fact that net profit is initially determined at the sale!
P.S. I will be diving into the details of this strategy in my Feb 20 event, Scaling Your Landscape Business. Bring your team. Join Bob Marzilli (guest speaker) and myself for this once in a lifetime learning event.