Running a profitable home services business is no easy feat. Many entrepreneurs started out as technicians. They don’t have MBAs and can struggle to understand the business side of their operations, leading to many silent profit leaks and missed opportunities. In this episode, I sit down with seasoned builder Mark Williams to uncover the common financial pitfalls that trap home service providers. Learn how to understand the true cost of your employees, recognize profit leaks, and to implement systems to keep more of what you earn. Whether you’re an HVAC technician, roofer, or general contractor, this conversation will give you the strategies to build a more profitable and sustainable business.
You’ll Learn How To…
- Understand the business numbers, such as markup vs. margin, to avoid profit leaks
- Use a labor burden calculator to find the true cost of your employees
- Use the Profit First system to protect your profits and prevent overspending
- See that business success is about fiscal management just as much as technical work
- Incentivize and keep your employees by sharing in the company’s profitability with them
- Build strong relationships with clients, leading to higher profits
Key Moments…
[01:02] Importance Of Knowing Your Numbers
[03:16] Difference Between Being A Good Builder And A Good Business Owner
[05:32] Understanding Margin Versus Markup
[07:28] Importance Of Charging Reasonable Rates
[13:17] Tracking Costs And Avoiding Profit Leaks
[32:07] Implementing The Profit First System
[41:14] Protecting Cash Flow Through Separate Bank Accounts
Importance Of Knowing Your Numbers
Knowing your numbers is crucial for running a successful business. Many home service business owners struggle with understanding their true costs, margins, and profits.When you don’t know or understand your numbers then it is easy for silent profit leaks to drain your profits away. By understanding the business finances, entrepreneurs can find the areas where they are undercharging or overspending, and make better choices to improve their bottom line.
Difference Between Being A Good Builder And A Good Business Owner
Being a skilled craftsman or project manager does not automatically make someone a good business owner. Many builders are very good at the technical aspects of construction, but they don’t necessarily have the financial and operational expertise to run a profitable business. Running a business means builders need to learn how to understand the business areas like accounting, marketing, and strategic planning in order to transition from just construction skills into operating a sustainable, profitable company.
Understanding Margin Versus Markup
One of the most common mistakes business owners make is confusing margin and markup. Charging a 12% markup does not equate to a 12% margin – the actual profit percentage is lower. By understanding the difference and how to properly calculate both, business owners can make sure they are pricing their services to make a profit. When business owners don’t understand the business number, they can make decisions that end up costing them money instead of bringing it in.
Importance Of Charging Reasonable Rates
Many home service providers undercharge for their work, usually for 1 of two reasons. First, they don’t understand the business financial numbers, or second they have a fear of losing customers. However, the best clients are willing to pay reasonable rates for quality service and a positive relationship. Home service business owners who know their true costs can confidently charge appropriate prices that keep them profitable while still providing great value to their customers.
Tracking Costs And Avoiding Profit Leaks
Tracking job costs and overhead costs in real-time is essential. Without a clear real-time view of their numbers, business owners may accidentally overspend or have to absorb increased material/labor costs because they did not get passed on to customers. Entrepreneurs who have systems to closely monitor finances can make timely adjustments to purchasing and pricing to keep their business profitable.
Implementing The Profit First System
The Profit First system gives a structured approach to managing cash flow and protecting the businesses profits. By allocating a decided percentage of revenue to separate accounts for taxes, owner’s profit, and other expenses, business owners can make sure they are prioritizing profitability from the start. This method helps entrepreneurs understand the business and develop the discipline to consistently pay themselves and the government before covering other costs.
Protecting Cash Flow Through Separate Bank Accounts
Maintaining separate bank accounts for different business purposes, such as customer deposits, operating expenses, and profit, can help home service business owners better understand the business side of things and protect their cash flow. This makes it easier to track the true financial health of the company and ensure that money needed for one category is not spent in another.
About Mark:
Mark D. Williams Custom Homes is a third-generation high-end residential builder in the Twin Cities, creating dream homes through thoughtful remodeling transformations and ground-up custom builds. Our company was named Minnesota Builder of the Year in 2021—an incredible honor considering the high quality of builders in this market.
With nearly two decades of home-building experience, founder Mark D. Williams uses his endless curiosity and ability to adapt to deliver an exceptional home-building experience for all his clients. He credits this success to his collaborative approach with trade partners and homeowners, and his nonstop quest to be a fun, trustworthy, highly-skilled, and creative partner in the process. He surrounds himself with dedicated craftspeople who share his company’s mission to bring homeowners joy while helping them create their dream lifestyle.
Connect with Mark
Book Your Profit Impact Call – I’ll Find You $50,000 in Profits in 30 Minutes With a Live Profit Accelerator Simulator
