You went into the plumbing business expecting to make a profit from your hard work. If profit is what is missing, Profit First for plumbers is you best choice for making things right. Profit First is a way of managing your business finances that assures a profit from the very start. The system helps you find and eradicate the hidden costs that typically rob you of profits. And, it improves budgeting and how you handle your cash flow.
The basis of Profit First is an adjustment in the way you do your bookkeeping. The standard bookkeeping formula is this:
Incoming revenue minus expenses equals profit (or loss)
This way of doing things gets the numbers right but it ignores some basis financial issues in your business. It is way too easy to find yourself working hard at the plumbing trade and not seeing a profit. This typically happens because you are taking low-paying work and have cost overruns in both on-the-job plumbing and the office side of your operations. In short, this way of doing things always seems to leave profit in your plumbing business up to chance.
Profit First takes the standard bookkeeping formula and turns it around like this:
Incoming revenue minus profit equals expenses
When you use Profit First for plumbers, you always take a profit, typically on the tenth and twenty-fifth of each month. And, as you might have already guessed, you need to do something about your incoming revenue and your expenses to make this work. Some of this is pretty basic. You look at your cash flow, when you receive money and when you pay bills. Keeping a close eye on your cash flow helps contain the expenses of the moment before address anything else. The next thing is to look at the profit potential of the work you are taking and the costs associated with doing that work. The third thing is to look at how you are running the business side of your operations to find the hidden costs that are eating up profits.
The key to making Profit First work in your plumbing business is confronting Parkinson’s Law. Parkinson’s Law was stated by Mr. Parkinson, a former British civil servant in the middle of the 19th century. He said that work tend to expand to occupy all available time. That is, if you assign someone a task and a due date, they will almost always take up all of the assigned time to get the work done. Over the years other corollaries have been added such as this. The amount of money used for a project will always equal the amount budgeted (or more). These tongue-in-cheek observations are true and are the bane of many a small business. To make Profit First work for your plumbing business, you need to tackle and defeat the effects of Parkinson’s Law.
The basic reason why there are cost overruns in so many businesses is because the actions of staff are “invisible” to managers and owners. To make the Profit First system work, you need to be able to see what is going on in the financial part of your operations. At Exigo Business Solutions we advise our clients to use bookkeeping tools like QuickBooks in order to better-manage their finances. With QuickBooks custom reports you can see the details as well as the big picture. This allows you to track expenses. Then, when you better see your financial picture, you can address budgeting, timelines for assigned projects, and all of the otherwise-hidden details that have been derailing your profits.
If your plumbing business has problems that are difficult to track down, an excellent approach is the Fix This Next system. With this approach you learn how to find the problems in sales, profits, and organization at the core of your business. Then, you will learn how to set up simple and efficient systems to let you track those problems so that what gets fixed stays fixed.
To find out more about how Profit First for plumbers can help your plumbing business guarantee a profit, contact us at Exigo Business Solutions in the Kansas City area.
