Transcript Chart Your Course to Business Success

May 1, 2012
Advisors On Target
Chart Your Course to
Business Success
On Target Business Intensive: Session 6
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Implementation Steps
• Session 1
• Create a working draft of your Mission Statement
• Create a working draft of your 1 and 5 year Vision
• Answer the 10 questions on the handout
• Session 2
• Review your own financial statements and chart of accounts with
what you learned in Session 2
• Session 3
• Create a budget for 2012
• If you already have a budget, review and revise as needed
• Use the cashflow projection model (at the bottom of the budget
tool)
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Implementation Steps (cont)
• Session 4
• Determine your breakeven point for your 2012 budget
• Annual
• For the month of February 2012
• Define your target markets (Fill in Marketing Plan – Part 1)
• Do a competition analysis (Fill in Marketing Plan – Part 2)
• Session 5
• Define Marketing Strategies (Fill in Marketing Plan – Part 3)
• Include a Customer Communications Plan
• Create a Marketing Budget using the template
• Additional activities
• Values Exercise
• Business Diagnostic Assessment
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Agenda for today
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Recap last week – Questions
Sales Goals and Marketing Budget
Tracking your marketing and sales
Job Profitability
• Job Costing
• Job Profitability Tracking
• Working with your Production Team
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Questions about
anything so far?
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Sales Forecast/Sales Goals
• Provide a month by month sales forecast for the next year
based on
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Historical Sales
Market Research
Seasonal Flow
Growth Assumptions ( Budget)
• Project Number of Leads/Bids required to achieve sales goals
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Average size job
Close Ratio
Lead to Bid Ratio (use 95% if you don’t know)
To calculate required leads: Sales Goal ($) divided by Average size
job, divided by close ratio, divided by Lead to Bid Ratio
• Example: $60,000 sales goal divided by $4,000 Average job,
divided by 35% close ratio, divided by 95% = 45 leads needed
Marketing Strategy/Budget
• Marketing Strategies and Tactics are informed by:
• Your Target Market and the best ways to reach them
• The number of leads you need to reach your sales goals
• The strength of your CRM and your Customer Communications
Plan
• Your Marketing Budget
• Use Marketing Budget tool to plan for marketing/advertising
spending and timing of marketing activities
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Why track leads and sales?
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Track effectiveness of marketing efforts
Track return on investment of marketing dollars
Track effectiveness of sale techniques
Track effectiveness of various sales people – owner, estimator,
outside sales person, etc.
Sales Tracking Tools
• Should help you measure:
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Close Ratio – Bid to Sales
Dollar Value Bid to Dollar Value Sales
Days to close
Lead to Bid Ratio
Lead to Sales Ratio
Cost per lead
Cost per sale
Effectiveness of Marketing Tactics
Let’s look at an example
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Job Profitability & Productivity
Job Costing
• Starts with a good Estimate and Work Order
• Inform your Production Team
• Expectations
• Hours
• Hours by task breakdown is better
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Collect Hours daily or weekly
Stay on top of Material costs
Job cost after every small job and during every big job
Debrief in a timely manner
Job Costing Example and Tool
• Quickbooks can also be used as a simple job costing method
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Put a system in place
• Use QuickBooks to keep track of employee hours,
materials & equipment charged to each job
• Implement a tracking system
• Job Cost each job in QuickBooks or Excel
• Summarize the data using the On Target Job Profitability
Template
• Or adapt your existing job costing system to be able to look
at all jobs
• Update monthly & review reports
• Use for evaluating employee productivity - monthly
• Use for evaluating profitability of types and sizes of jobs
– quarterly or semi-annually
Gross Profit by Job
Total Price
- Labor
- Materials
-Equipment rental/other pass-through item
= Gross Job Profit
Job Costing Example…
Components of Job Profitability
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Job Type
Invoiced Price
Materials
Equipment rental and other pass-through costs
Labor Cost (Hours x average rate or actual payroll for hours worked)
Labor Burden (payroll tax and Workers Comp)
Bid rate
Hours estimated (and added on)
Hours actually worked
Foreman/person in charge of job
Sales person who sold the job
Other relevant data – date of completion, job number
Other customized data you want to include or track
• Customer service feedback
• Materials estimated
• What else?
Set a target from your own
budget
Revenue
- Labor
(31%)
- Materials (9%)
- Other Job Costs (1%)
- Subcontractors (3.6%)
= Gross Job Profit
500,000
155,000
45,000
5,000
18,000
277,000
Gross Job Profit % Target
55.4%
This becomes a KPI
• Use budget target KPI as a starting point
• As you begin to track data, your actual company average will
emerge
• High/low performers will show up
• Re-evaluate & set new targets periodically – company &
individual
Profitability & Productivity
Tracking
• Track the Gross Job Profit % to analyze:
• Employee Productivity
• Profitability by job type, by size, by foreman
• Track the hours bid to hours actually worked by job to analyze:
• Employee Productivity
• Accuracy of Hours Estimated
Let’s look at an example…
Use the data for management
decisions
• Find out the size of jobs that are the most profitable for
your company
• Find out what types of jobs are the most profitable
• Discover your company’s average gross job profit
• Evaluate gross job profit by foreman
• Use this data as a management tool to encourage
employee productivity
Implement the system
• Generate job profitability reports monthly
• Meet with each foreman monthly to review graphs & reports
• Use the opportunity for coaching the foreman for increased
productivity
Coach for Success
• Share company targets
• Review data together
• Receive feedback from foreman
• What support he needs from you
• His ideas for improvement
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Together set personal targets
Discuss ideas for improvement
Agree on what will be done
Arrange follow-up
Implementation Steps
• Session 6
• Start Job Costing every job if you aren’t already
• Implement a system to track job profitability over time to
measure progress
• Coach foremen to improve
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