“Starting strong is good. Finishing strong is epic.” – Robin Sharma
Your performance in this final quarter of the year will have an oversized impact on your year-end profits. In fact, it’s so important, that you should be reminded of it and think about it every year at this time.
The question you should ask yourself is how you can persistently stay the course and finish this year with stronger net profits? Here are two critical areas of consideration.
1. Weekly Throughput
The main driver of your net profit in the fourth quarter is measured by your company’s Weekly Throughput, i.e., the amount of billable production work your company can produce (“put through”) each week.
Here is why this is so important: Even though you estimate for net profit with each and every sale, starting with your first sale in January, the fact is that all the profit from those sales goes towards covering your overhead (OH) until all of your overhead is paid for. Once your overhead is covered, you have reached what accountants call your “break-even” date.
Once you hit your break-even date – all the profit you then make from every sale goes straight to your bottom line. Not only the net profit, but also the operational profit (that previously went to pay for overhead) now goes straight to the bottom line. This date is generally hit right before or in the 4th quarter.
Do you know what your break-even date is? Have you reached it yet?
2. Operational Margin
My high performing clients are able to achieve an Operational Profit Margin in the upper 30%’s and 40+% depending on the type of business they are in (and how long they have been working with me). If your operational margin is, for example, 35%, then after you hit break-even, every dollar that gets produced will put at least 35 cents or more towards your bottom line! That is a lot!
To this end, the more sales that your team can produce and bill in this final quarter, the more net profit you will ultimately earn. Conversely, if you have too many hiccups this fall, you put your year-end net profit at risk.
Thus your drive for additional revenues to maximize your margins should be on your mind all the time, if you want to finish the year strong.
Here are 12 Ways You Can Increase your Weekly Throughput and Year-end Revenue:
- Keep salespeople motivated to continue selling through December, using situational and year-end incentives. Having an increased backlog is good, it puts positive pressure on the crews, so they have more than enough work to chew through.
- Decrease the non-billable time (shop time, morning, travel, deli and gas stops, evening) so more time is spent on billable work.
- Decrease (eliminate) the unnecessary go-backs needed to complete a job by ensuring crews are properly equipped and dispatched, with trucks and tools operating smoothly.
- Ask crews to plan to be flexible in case of bad weather, working late or weekends, so you can hit your Weekly Throughput goals.
- Use overtime (OT) to get your extra backlogged work done; the incremental cost of OT will be more than offset by the additional operating profit that will drop straight to your bottom line. Do the math!
- Sell more fall and winter add-on services. Remember, enhancement sales can be sold at a higher margin than your standard work anyhow, so it is a double win.
- Walk every maintenance property and sell them services to be done now, or in the winter. Find extra work that can be performed by crews already on maintenance properties.
- Sell holiday decor now to be done this fall. For example, how about selling front door arrangements as you see in the magazine Southern Living?
- Sell fireplaces and hardscapes to be started now (and completed during the winter).
- Raise next year’s hourly rate right now, and apply it to your fall work. Who says you have to wait till January to raise rates?
- Deliver your holiday presents to clients early, and they will likely give you more work to take care of.
- Incentivize your crews to increase their Weekly Throughput. Make crews accountable for their weekly production goals, and motivate them to be as efficient as possible. Share the winnings when they sprint through the finish line.
Connect the dots:
Many employees may not immediately grasp how sprinting through the finish, and ensuring a healthy net profit will benefit them and their families. Take the time to explain this to them by connecting the dots on how it benefits the company and how it benefits them directly. Using an incentive plan helps them see directly how it benefits them and creates a win/win situation for both of you.
(I love helping companies set up effective incentive plans because it is so win-win when done right!)
Your Challenge: Pull everyone together if you have not already done so, and explain to them which day in your calendar you hit break-even and how the production during the 4th quarter will help the company hit and beat its year-end profit goals, thus benefiting everyone.