Do you know how many leads you need coming in weekly to hit your year-end income target? Do you know how big a staff you need to handle the paperwork associated with you proposals and projects?
That's what is meant by "Managing by the numbers."
If you track performance closely, you will realize that your business' performance is very predictable. Its progress can be boiled down to a handful of key measurables.
If you'll answer the following questions, relying on gut instinct alone, you can probably develop a feel for the targets you need to be hitting.
1. How much money do you need to cover your overhead and living expenses this year?
2. What's your average profit per job?
3. Now, calculate the number of jobs do you need run this year to cover your overhead and living expenses.
4. How many proposals do you have to send out to land a typical job?
5. Multiple the required number of jobs by the number of proposals per job.
6. What percentage of your leads (opportunities) justify a proposal?
7. Multiple the number of proposals required by the number of leads you need per proposal. This is the number of leads you need to hit you minimum income target.
Let's continue on with sales, project management, and administration:
8. How much time does it take to call on a lead?
9. Multiply that by the number of leads you have to chase down.
10. How much time does it take to run an estimate and write up the proposal?
11. Multiply that by the number of proposals you have to generate.
12. Add the two together. That is the minimum time someone at your company must devote to generating work.
13. How much time do you spend managing a client and project?
14. Multiply that by the number of projects you've will run during the year. That is the minimum time someone at your company must devote to client project management
15. How much paperwork is generated per lead?
16. How much paperwork is generated per project?
17. How much time is required to process that paperwork?
Do you have enough overhead staff to handle the sales, project management, and administrative tasks? Do you have too much staff?
Let's switch our focus to the field:
18. How many hours a day do your guys stand around due to poor planning, weather interruptions, broken equipment, lack of material, lack of motivation, etcetera?
19. How much material will be used in the work you need to complete this year?
20. How many days will the crews work this year?
21. How much material per day do your crews need to get installed?
22. How much material per day does each crew need to install?
23. How much revenue per day do the crews need to generate (divide total sales by number of work days)?
24. How much revenue per day does each crew need to generate?
Does your plan balance out? Check time to see whether your overhead budget makes sense based on the numbers you calculated above. Create spreadsheets to track all of the key measurables. Keep a close eye on them. Review them frequently with your leadership team.
Are these the only measurables you need to track closely? Not likely. But tracking the above list might be a huge improvement over your current approach.
When you run your business by the numbers, you manage time more effectively; you resolve problems before they become unbearable; and most importantly - you increase the odds of hitting your income target.
Ron Roberts, The Contractor's Business Coach, teaches contractors how to turn their business into a profit spewing machine. To receive Ron's FREE Contractor Best Practices Newsletter visit www.FilthyRichContractor.com.