Please read this – too many tradie business owners think that to get ahead financially they need to sell more and do more. However this is incorrect most of the time.
Why? Because doing more (pouring more into the top of the bucket) will not increase personal financial wealth if there are too many holes in the bottom of the bucket.
Here is a very simple philosophy – focus on the power of the tiny 1% improvements:
- Cost of Sale as a % of Revenue – FOCUS on increasing your margins on materials, tightening up your ordering process, and reducing wastage.
- Overhead Expenses as a % of Revenue – FOCUS on eliminating expenses that do not add value to your customers or your business.
- Wage Expenses as a % of Revenue – FOCUS on improving your daily planning and preparation to eliminate unproductive minutes to increase individual productivity by 15 minutes per day.
RESULT – As per table below a reduction of 3% results in an increase in operating profit by 75%!
Beware being stuck in your ‘comfort zone’ – tradie mindset thinking only need to sell more to get ahead
When I present the above information to tradie business owners all agree it makes sense, however MOST state “yes that great but I don’t have time because I need to get more jobs in to keep everything running”. This statement is the classic ‘tradie mindset syndrome’ talking where the business owner doesn’t want to get of of their comfort zone to sit down to actually work on and analyse the business.
Lets see a classic ‘tradie mindset’ strategy:
- Increase sale by 50% – Ramp up marketing.
RESULT – As per table below a investing a huge amount of blood, sweat & tears to increase revenue by 50% only results in an increase in operating profit by 50%!
Moral of the story
Taking the time to fill the holes in the ‘bottom of the bucket’ resulted in an extra $10,000 operating profit!
Rather than investing huge amounts of money, blood, sweat & tears in marketing, recruiting more team members, doing more jobs, and doing more admin, just STOP!
Your priority as a business owner – You must take the time to review and understand your scorecard to be able to identify where the holes in the ‘bottom of your business’ are and what needs to be done to fill these holes.
If you require help understanding your scorecard to fill the holes in the ‘bottom of your business’ please email me – firstname.lastname@example.org.
Cheers Matt Jones – Founder Cube Performance