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Cut Your Contracting Business Down to the Perfect Diamond

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So you have worked to grow your business… and it has!

Your top line revenue is far higher than it used to be. Your bottom line, however, well that’s another story. It’s not high enough and hasn’t grown (much).

And besides that, there are some problems. Some of the departments in your business are shaky. You have a lot of new team members who are inconsistent. And the whole business isn’t reliable yet.

This is normal when building a business.

  • You grow it
  • You fix it
  • You smooth it
  • You optimize it

Often, net profit lags sales growth. This is because you have been so busy working on growth and just keeping up with the growth you created, that you haven’t optimized it yet.

Take heart though. Imagine a 10% or 12% (or more) profit on this larger volume. If you hadn’t built it up to this level of top line sales, you wouldn’t have the opportunity to carve 10% from it.

You may be closer than you think.

Many contractors before you have found themselves with $5 million, $10 million or even $20 million in sales, with little net profit to show for it. They spent all their revenue on operating their business. They didn’t spend all the money on purpose, it’s just how it happened without a focus on optimizing the business.

Some though, became Diamond Cutters and figured it out.

 Profit-Revenue-Chart

A Diamond Cutter takes a rough stone and, by working diligently to take pieces away and polishing, creates something of even greater value. That’s what you need to do. Take unnecessary expenses away, and polish. Smooth the rough parts. Make it simple and elegant.

A Diamond Cutter finds ways to run the business on less than 100% of the revenue, leaving some percentage left over as a profit. As we have discussed, a 10% profit for a large business is very good. Small businesses may do better once they level out.

 

Ready to Become a Diamond Cutter?

To go through the 7-part Diamond Cutter exercise, subscribe to the School of Entrepreneurship. You can start with a Free Trial.

About the author

Richard Fencil

Richard Fencil lives in Guilford, Connecticut with his wife and three sons. He works for Basement Systems in Seymour, CT that specializes in basement waterproofing, crawl space moisture control, foundation repair, and basement finishing.

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