I’m going to get right to it today.
Examining the profitability of your work is key to getting paid what you’re worth.
Many business owners I speak to don’t even know if a job was profitable or not. They’re so busy moving on to the next job that they don’t have the time or perhaps the skill set to go back, gather costs and see if that job was actually profitable.
Let’s be clear – it doesn’t matter if you’re a $100 million business, a $10 million business or a $1 million business. Product or job profitability measurement is the same exercise.
And I’m not talking about just 2% profitability. Is it profitable enough to sustain the company’s overhead, fund all of the salaries and have sufficient working capital to grow the business?
If not, it’s critical to understand why and what you can to do fix it. You may want to create a budget as a measuring stick to guide you in determining how profitable jobs need to be in order for you to achieve a certain bottom line and cash flow.
The free Pricing for Profitability Model you can download here will help you learn what your prices actually need to be in order to make your desired level of profit on each project.
It starts with known costs for a product or service and calculates a price for a desired profit margin percentage.
• Labor hours and wage rate (or simply a total)
• Estimated tax & benefit % of wages
• Material quantities and cost (or simply a total)
• Outside/additional costs/contingency (if applicable)
• Commission % (if applicable)
• Targeted/budgeted profit margin
The result is a price that, given the costs identified, will provide your desired profit margin.
If you’re serious about getting paid what you’re worth, I’m offering the working spreadsheet with all the formulas for free as well. Just hit reply to book a discovery call with me, and let’s get your pricing working for you!