The Grow show is brought to you by The Harvest Group and is a regular podcast series focusing on the difficult issues and challenges contractors face day-to-day in their businesses. The Harvest Group includes Bill Arman, Ed Laflamme, Steve Cesare and Cindy Code.
This podcast is part four of a series titled: How to make more money.
Here’s what the series looks like:
• Part One: What is gross margin, and the basics of gross margins
• Part Two: How to increase your gross margin with job sequencing
• Part Three: Understanding your direct costs – intimately
Today’s Grow Show is Part 4 of our recent podcast series on “Making More Money by improving systems.
Gross Margin really is the “financial furnace” for the organization and provides the best opportunity to make more money for an organization.
GROSS MARGIN: Revenue minus Direct Costs
Three ways to lower your direct costs by having the right systems in place:
1: Have a budget and track your costs
• Establish a budget for labor and materials for each revenue stream
• Track your progress on budget vs. actual
• Learn what is working and what needs focused attention
• Adjust your game plan as you move through the year
2: Do job costing for revenue streams of 10 percent or greater
• Job cost your jobs on any revenue stream greater than 10 percent
• Know your costs, know your costs, know your costs
3: New job start-ups
• Establish and document existing conditions at turnover
• Do a thorough quality review to show starting point
• Get through the irrigation system in 30 days or less, and get in repair orders as an extra
• Define with the customer what is extra and what is maintenance
• Provide proposals for extra work
• If there is a major issue stop, get clarification of expectations, then take action
• Get job sequenced from the beginning
• Get weeds under control; put down preemergent or mulch to prevent weeds
• Establish AG Hort needs and timing
• Meet with client to make certain all is in order within the first 90 days
Stay tuned for another Grow Show podcast that will unveil three more key ways to increasing your Gross Margin.