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Do you know the formula for growing your electrical contracting business? Wouldn’t you agree that before you can hit a target you MUST first decide on what your target is? In order to grow your business you must:
#1 - Define exactly what you want - If you do not know what you want, then you do not have a specific goal or are not aiming at a specific target. Not knowing what you want is what I like to call the Ready-Fire-Aim method. If you have not defined exactly what you want to do with your electrical contracting business you are out there day after day working hard but not quite getting the best results.
I am not talking about what you don’t want. That is easier to identify. For instance, you may think "I don’t want to grow too big of a company and be out of control". Or, "I think I need more sales". Or, "I need more electricians".
I mean define and quantify EXACTLY what you DO want! As an example: "I want to grow my business this year so I can.....(buy a new truck, buy a new house, send my kids to college, etc.)"
#2 - Quantify your Goal - Now....what are the precise numbers in time/revenue/bids to get there? Follow along.
If I currently generate a Net Profit (after expenses) of 20% and I want to make $200,000 this year, then I need to successfully win and manage $1,000,000 in jobs.
Using some rules of thumb you can estimate that for every $1,000,000 of sales you will expend 10,000 man hours. At 2,000 hours per year per man you will require 5 electricians to run this work. Excellent: You now have some very specific numbers but you’re not done yet.
You realize that this year your sales may only be $750,000, based on the projects you have. That’s going to be short of your goal of $1,000,000 and more importantly your target of $200,000 in profit.
How do I get my sales volume up? It is simple mathematics. If you usually win 1 in 3 of the jobs that you bid, and you project $750,000 in projects this year, then you bid $1,250,000 to get that business.
Following the same idea, to grow your business, you must grow your bid volume. If you are going to be $250,000 short on your sales goal, you need to bid another $750,000 to win more projects.
#3 - Have a plan - Write down exactly what your business goals are, when you want to reach them and what it is going to take to get their step by step. Make sure you include:
1) Exactly how much business volume you are targeting and the number of bids you will need to produce to reach your revenue goal.
2) Exactly how much profit you want to make per project. It won’t do you any good to win projects only to find out that you didn’t make any money on them.
3) The tools you plan on using to help you reach your goals. Do you need more training to become a better contractor? Study this site a few hours per week. Enroll in a class if necessary. Get more information from your suppliers and piers. Also, use a good electrical estimating program that is systematic. There are several electrical estimating programs out there, but from personal experience I know Red Rhino Electrical Estimating System provides you with a solid tool to create complete and accurate electrical estimates.
Get busy... and make your electrical contracting business grow to reach your goals!
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