Variety can be a good thing, but many remodeling companies and handyman services that want to measure their performance against normal standards must be on the same page. To help remodelers and other home improvement services align their bookkeeping practicing, were going Back to Basics.
THE COST OF DOING BUSINESS
In addition to materials, tools, labor, subcontractors, and everything else that is required to complete remodeling projects and provide professional handyman services, you can’t loose track of the expenses you should have to keep your business running. Those expenses are telephone, internet, rent, vehicle insurance & maintenance, and fuel among a host of other expenses that can’t be pegged to a particular job or project.
Taken together, these expenses are your “overhead”, and by carefully tracking them ensures that you know exactly what your monthly nut is, and allows you to ensure they are included in the selling prices or rates of your services. Although your overhead should be almost the same amount each month, it’s important to understand how certain decisions —– buy a new table saw, move into a bigger office, hire an office manager, provide employees with uniforms —– affect your overhead and, ultimately your bottom line.
I recommend getting a box of folders and an accordion file and begin charting your accounts by grouping overhead expenses accounts under primary headings. Then have a separate folder that has a sheet for each month stating what your actual overhead is for that particular month. I also suggest that you list your gross income along with the ending balance after all overhead and operating expenses have been deducted. This doesn’t have to be anything fancy and can be done from a basic ledger, notebook, or an excel spreadsheet if you prefer to use a computer. This will allow you to see what is coming in and what is going out. With just this basic sheet you have important information to make serious decisions, such as what services are most profitable and possibly what particular items or even employees need to be removed or at least downgraded for certain services and hours for employees. In business you are forced to make hard decisions that will ultimately decide your company’s future.
I believe with marketing and sales it is a must to group all expenses related to finding and selling revenue producing work here. Include the cost of simple marketing materials, such as business cards and letterhead, as well as design, printing, and postage expenses for a direct mail piece. Whether it’s a newspaper ad, flier, commercial, or even a referral have a special code that represents that particular marketing avenue. Have a place on your contact form that you should have on your website asking your potential customer where they heard of your company and if if there was a special code with the ad. If they fail to provide this information upon your initial contact ask them where they saw the ad. This is VERY IMPORTANT because it allows you to see what marketing avenue is giving you the best return for your investment. I swear by this system and it has not only saved me thousands of dollars on wasted marketing, it showed me what was really bringing in the business. During this period I was spending an average of $1000.00 monthly in all types of advertising only to find out that over 95% of our business had come from FREE ad placement on such sites as Craigslist, and from Angie’s List which is a non-bias consumer reporting company that allows members to search for service providers and not only review their rating, but read in detail what other customers had to say about the company. When taken together, these expenses will show you how marketing and sales relate to revenue, giving you an accurate picture of what it actually costs to generate work and allow you to separate the weeds from the flowers.
Many small businesses often rely on word of mouth and most of the time spend nothing on marketing. This strategy has drawbacks and will keep you where you are—— a small business. It is stated by many professional marketing firms that you should spend at least 1-3% of your gross revenue on marketing. I strongly disagree, I believe through trial and error that a small business should spend at least 10-15% of its gross revenue in marketing. However, that being in marketing avenues that have proven to be productive in the past.
A lot of small businesses believe that when business is booming that is when you should really reinvest in those big ads and infomercials. However, many successful entrepreneurs will tell you the most important time to invest the farm in marketing is when business is at its worst. Not only financially, but but physically and mentally as well. Go out and pass out fliers in your neighborhood or target area, do work for a charity or church where you will get your name out there and most likely a special thanks on the charities website or church’s monthly bulletin. Never ever forget Press Releases, if written correctly you can get a half page of FREE advertisement. Do a search on writing effective Press Releases, big companies do it all the time. Start a blog that you update regularly and deals with the services you provide and offer free advice and helpful tips that will keep people coming back. Most importantly people will only believe in you if you believe in yourself and your product or services. Be confident, explain to them how what you have to offer will save them time or money, make their life easier, or increase the value of their home.
If you are a small business owner you are more than likely like me, the underdog. The amazing part is that most of us wouldn’t want it any other way, to show all the people who said we were dreamers, that we would never make it, that we did make and are happy with where we are and where we are going. If there is no work one day use that time tom beat the street handing out fliers meeting and talking to people and you might just be surprised at how many people call you with work.