Tips To Growing Your Profit Margins
A reader writes: "When I was getting started in the cleaning business, I had 30-50 percent profit margins. Now I struggle with getting 10-15 percent. What am I doing wrong?"
Congratulations on your growth and success in a very competitive world. Many people would love to get 10-15 percent profit margins on their contracts. Please understand a basic principle that you need to take into account is that you have grown from a small customized service to competing with some of the "big boys" for accounts. Also note that the larger the contract, the smaller the profit percentage in most cases. A graphic example I use in my classes on estimating and bidding is that I will take 1 percent of $1,000,000.00 over 100 percent of $100.00 anytime.
Some people get a little too hung up on percentages which is just one way of tracking your success and growth. Another is how much are you actually bringing home in dollars each month? I had a friendly competitor whose business was far larger than mine. He had several vehicles, a large custodial and project work crew and equipment that was unbelievable in cost and productivity. He had a large workshop, rug cleaning machines and more chemicals than many distributors in the area. He was always busy and I envied him since he was billing far more than I ever would.
One day, as we were comparing notes, I learned what his actual profit margins were and realized that he was taking home less than I was some months even though he had a lot more headaches that I did. What an eye opener that was for me! With all his layers of staff, office overhead, equipment, vehicles and volume, he was working a lot harder than I was for about the same take home pay.
Know your numbers and realize that your percentage will probably drop as your accounts grow. Always be looking for the balance that brings in the most dollars regardless of the profit.
Your comments and questions are important. I hope to hear from you soon. Until then, keep it clean...
Mickey Crowe has been involved in the industry for over 35 years. He is a trainer, speaker and consultant. You can reach Mickey at 678-314-2171 or CTCG50@comcast.net.