I have heard, in almost every place I work, that you can make up a losing job with volume. It is almost always the case, when this is said, that the person who is saying it is not providing the volume. So, let’s talk about our business and volume.
In sales, volume is what it is all about. If you run a sales increase, you will always look more profitable in our business. That is because the costs of the business do not show up immediately. Even on a simple installation that is done immediately, there are some costs that simply come later.
Let’s use a water heater as an example, the job is sold and you go right out and do it, because no one wants to be without hot water. The labor costs are recognized immediately, some parts may be taken from inventory and reordered later, making the job appear more profitable. Sometimes the water heater will be dented and additional trips and labor will be needed to complete the job, but don’t worry, you can make it up in volume.
I once managed an area for a major Retailer. Right at the end of the fiscal year, we had a huge sales increase, mostly caused by unusual weather. As a result, our year end profits were way up, we had the sales without the even material costs. I filled an adjustment to my next year’s plan, with a reduction in sales, gross, and net profit.
The executives I worked for had a fit, not only did I want to reduce my sales projection, but my profit projection was also less than the current year. I was required to fly to meet them the next day, all the way across the country to explain this. Then, after explaining it once, I had to again fly all the way across the country to help them justify it to their boss, the company president.
You see, they were in the retail business and everything they did was based on averages, even their cost of inventory. They then decided they had to try and make up the numbers in some other way. They more than spent the cost of the windfall talking about the windfall. We lost it in volume. After a few months, I was rewarded for this windfall with a bonus, extra week of vacation, and a cruise. I had no idea that I could get all of this for volume. I was a great manager, or was I? All I intended to do was be clear and reasonable while reporting.
I could not believe that after all the trips and explaining, I would be rewarded. They explained that I had to be rewarded because everyone could see my excellent numbers and expected me to get a reward. Rewarding me would make them try harder, WOOHOO. For me, it was just the beginning, as I learned to search for just those types of opportunities. And for the record, I went on cruises and made double bonuses for four more years, five in a row.
Job cost accounting is important to a Contractor. Every expense should be assigned to a job, every hour, every minute, every phone call. Or is that just too hard? With today’s systems, it is not that hard, it can all be done easily. We all had cost accounting in school, but if you are not going into manufacturing, you forget it. The true cost of a job is often really discovered several months after its completion. Retailers do not take the profits until it is at least complete and the bills are paid. The average price of installing a water heater should be based on all the factors involved and that information should be used in pricing all future water heater jobs.
Back to making it up in volume. What can volume save you? Well, it can save you in many ways, if you manage it. It can help pay the rent by eliminating unproductive time. You can shrink the service area of any one technician by reducing mileage and road time, you can purchase parts in larger quantities, reduce the price, and save on shipping costs.
The point is it only saves you money if you truly have it, plan for it, and manage it. Not by taking a job that you know is a loser from day one, from a company that is making a billion dollars and expecting you to lose money for the privilege of working with them. I guarantee you the person asking you is not someone you can respect or someone that respects you.
Craftsman Republic® allows you to fill unproductive time, a few jobs at a time, if you choose. You can select your area, the jobs you would like, and we will offer those services. Yes, we may call and ask you to look at work outside your area, or outside of your normal scope, just say no and we will respect your choice. We understand that, in some circumstances, an additional job can work for you, and without planning, work against you.