By Andrew Pollock, CPA
Every type of business, whether it’s a professional service, restaurant, or retail store, has to bring in money. The first step to bringing in money begins when we set our price. Still, many business owners have no idea how to set their prices, and simply choose a number out of nowhere. There is a better way.
1. Use Tech!
We can take advantage of accounting technology to hone in on our costs, build a profit into our business, set more fair prices for ourselves, and to partner with a professional to assist you with your profit.
In the construction industry, we nail down our job costing, usually by simply adding up our cost of labor, materials, and overhead costs (advertising, insurance, professional fees, etc.). By becoming familiar with our job costs and our overhead costs, we can begin down the path to ensuring our profitable success in 2020. Fortunately, we live in a world where we can utilize software at the tip of our fingers to help us track these costs.
There are many resources available, but one software sticks out above the rest: Intuit’s QuickBooks.
This accounting software comes at the best price point, is the most user friendly, and has the largest market share. The program can be easily implemented to help contractors track and forecast their job costs. We are not affiliated with Intuit and this is not an advertisement for QuickBooks; in fact, we probably recognize more than most how many flaws the software carries. However, we have also seen many of our clients thrive based on the information the program provides. Contractors must understand and control their numbers in order to be profitable.
2. Think Profit First
It’s one thing to produce information about our historical costs, and quite another to convert that information into decisions. Implementing accounting software is a necessary starting point to making profitable decisions for our business. Another critical step to take is transforming our mindset into a profitable mindset, and our behaviors into profitable behaviors. Transitioning to this new thought and behavior pattern may be difficult, but we’ve found that the Profit First system makes it much easier.
Profit First changes our way of thinking about profit by changing profit at its most basic level: the profit equation. Instead of having the mindset that Sales – Expenses = Profit, the Profit First method instructs us that Sales - Profit = Expenses. Of course, there was a whole book written about Profit First, so it’s hard to explain it within one paragraph, but we know that when we combine an accounting software like QuickBooks along with the Profit First system, we are well on our way to having a profitable 2020.
3. Believe in Your Own Success
After we have a strong software and behavioral system in place, the final piece for us to focus on is ourselves. Many business owners fall short of success simply because they aim too low. We can study the numbers in our QuickBooks file and stare at the OpEx Profit First account all day long, if we limit our own value, we’ll never unlock our true potential.
When owners can see past all of the excuses and fears, they can start managing the business in a way to truly benefit their lifestyle. Contractors need to raise their prices. They need to work on projects that they specialize in and are more profitable to their specific business. Of course, this is easier said than done, but once business owners understand their value, the business starts to become more and more valuable.
At Integrated Accounting Solutions, we love small business owners and we specialize in contractor profitability. We are proud to be Advanced Certified QuickBooks ProAdvisors and Certified Profit First Professionals because these resources allow us to bring out the true profit potential hidden within yourself. Your job is to focus on the work you do best, and our job is to ensure that your business is profitable. Whether it’s bookkeeping, tax planning and preparation, or profit consulting, we can help you build profit into your business in 2020.
Have specific questions? Schedule a consultation with us today here.