This Article Will Focus on increase profits and to help plumbing contractors to identify and stop profit leaks. It is the little leaks that sink the big ship…not the big holes…they are easy to see and fix!

Profit Drain #1 In-House Bookkeeper

Until Your Plumbing Company – Reaches at least $5 million in annual sales you cannot afford to hire a qualified bookkeeper or construction accountant full-time to put on your accounting staff. And there is no such thing as a part-time qualified bookkeeper or construction accountant.

For Example – You hire someone with bad habits; but they are a cheap bookkeeper part time at $15.00 an hour for 10 hours a

Increase Profits

Profits Down the Drain

week thinking you will save money. The problem with that is you may not understand the true cost to have them on your payroll, including overhead, is closer to $25.29 per hour. This is known as the “Fully Burdened Labor Rate”.

You Can Find Several Ways – To calculate Fully Burdened Labor Rate on the internet and in a number of business textbooks. We have an Excel document with complex formulas that we built from researching historical records of past and present Plumbing Contractor clients including our own Plumbing Contractor Companies. If you want a simple “Rule of Thumb” the amount you pay an office worker by and multiply it by “2” to get a rough idea.

For Example – If you have an in-house bookkeeper A.K.A. “Profit Prevention Tool” (we have interviewed a lot of in-house bookkeepers and most have one thing in common; the belief they are entitled to be paid at least 80% of whatever the Plumbing Contractor earns since in their Paradigm they are doing most of the work and that is a subject for another day) costing you $25.29 per hour then…

Every Ten Minutes Your Bookkeeper Wastes Costs Your Plumbing Company $4.21

Increase Profits

Mistakes are made by under trained bookkeeper.

·        Arriving to work late

·        Leaving work early

·        Excessive coffee breaks

·        Bookkeeping errors

·        Bookkeeping rework

·        On the job training

·        Teaching them construction

·        Surfing the web

·        Personal emails

·        Personal phone calls

·        Personal internet chats

·        Facebook, Instagram, Twitter, etc.

For Every 10 Minutes A Day The Bookkeeper Wastes Each Day:

(10 Minutes) X ($4.21) X (260 Work Days Per Year) = $1,094.60

If Your Plumbing Company Earns 10% Profit You Need $10,946.00 More Sales To Maintain Your Profit Margin

Highly Profitable – Plumbing Contractors know have operations manual with standards of conduct for office staff and they have methods of monitoring productivity with “Project Management” and “Work Flow Management” software and other tools such as regular updates of Personality Profile assessments using Meyers Briggs or some other tools. What gets measured gets managed.

 

Profit Drain #2 Cheap Tools And Equipment

Increase Profits

Cheap Tools Robs Profits

Cheap Tools And Equipment – Cost Plumbing Contractors a lot more money than they know because they cannot see it. Out-of-sight means out-of-mind. When Plumbing Contractors invest in the best tools and equipment they can afford in most cases the overall bottom line profit increases dramatically because construction workers who take pride in their work produce better results faster with fewer repairs if they have quality tools and equipment.

For Example – You hire a qualified Journeyman Plumber for $25.00 an hour the Fully Burdened Labor Costs will be roughly $35.64.

Every Ten Minutes EACH Journeyman Plumber Wastes Costs Your Plumbing Company $5.94

·        Arriving to work late

·        Leaving work early

·        Excessive coffee breaks

·        Plumbing leaks

·        Plumbing rework

·        On the job training

·        Teaching them construction

·        Personal cell-phone calls

For Every 10 Minutes A Day EACH Construction Worker Wastes:

 (10 Minutes) X ($5.94) X (260 Work Days Per Year) = $1,544.42

If Your Plumbing Company Earns 10% Profit You Need $15,444.20 More Sales To Maintain Your Profit Margin

For Example – Your best construction worker asks for a tool:

  • It costs $1,200.00
  • It will save ten minutes a day in labor
  • It will last 3 years
  • The standard response from most Plumbing Contractor’s “The company can’t afford it!”

Highly Profitable – Plumbing Contractors ask their construction accountant to calculate the projected the Return on Investment (ROI) is and then consult their Strategic Business Plan to make an informed decision.

In This Example – It may make sense to finance the purchase even if it means using a credit card at 12% interest because the net return is $3,289.36 which is 245% ROI. See below:

Annual Savings                                           $1,544.42

Investment                             $(1,200.00)

Credit Card Interest 12%    $     (144.00)                        

Total Cost                                                   $(1,344.00)

 

Additional Profit Year 1                                    $  200.42

Additional Profit Year 2                                    $1,544.42

Additional Profit Year 3                                    $1,544.42

Additional Profit Year 3                        $3,289.36

 

Return On Investment (R.O.I.)                        245%

 

If You Use This Simple Formula – To help you work on your Plumbing Contractor Company and make it part of your Business Process Management Strategy you will be amazed how much your profits will improve.

Plumbing Contractor Success Is A Few Simple Disciplines Practiced Everyday

Plumbing Contractor Failure Is A Few Errors In Judgment Repeated Everyday

Two Plumbing Contractors Doing Similar Work – For similar customers with similar direct and indirect construction costs will have massively different Profit and Loss Statements. Size matters when it comes to piles of money and bigger profits!

 In Closing Some Plumbing Contractors – Over the years that I have been consulting and preforming outsourced contractors bookkeeping services have suggested rather strongly that I have particularly strong views when it comes to in-house bookkeepers and I would like to take this opportunity to explain why.

I Was Raised In A Construction Family – And after high school I went to university and majored in Accounting. I also have a degree in Project Management along with several other certifications and awards. So I am very blessed and extremely fortunate to have lived on both sides of the great divide of field work (tangible) and office work (intangible) as a Journeyman Plumber, Plumbing Contractor, General Contractor and Accountant. I have a unique perspective from having been where you are and doing what you are doing as well as what your accountant does and I understand why your banker approves or declines your loan applications.

Your Bookkeeper Is Your Best Friend Or Your Worst Enemy – Good, solid well skilled bookkeepers which you can count on, are a rare breed. Throughout time there have been and always will be good and bad bookkeepers.

Unfortunately For Most Plumbing Contractors – And other contractors for that matter, when a good bookkeeper really understands construction accounting they usually move to a better paying position. Which means the Plumbing Contractor is caught in a trap of hiring, training, educating and then losing good bookkeepers. Or worse yet they have a bad bookkeeper that nobody wants and who will systematically destroy the Plumbing Contractor.

We Have Seen Many Good Plumbing Contractors – Ruined financially and emotionally from being exposed to a toxic environment / workplace caused by a bad or incompetent drama queen or king bookkeeper in over their head, drowning in a sea of paperwork and not having a clue about construction accounting but very good at playing the “Blame Game”

It Is Compounded By The Plumbing Contractor – Who mistakenly believes all accounting is the same. This is no different than someone not familiar with the Plumbing Trade who believes all plumbers are the same. As we know they are not!

How Many Times Have You Hired – A “Licensed Journeyman Plumber” only to discover they have six months experience installing

Increase Profits

The wrong plumber for your company

potable water supply lines twenty times over? Or a plastic artist who can run DWV pipe fast, in tract homes, but is lost and confused when you ask them to design and install a cast-iron DWV system for a restaurant according to a print?

As A Plumbing Contractor – You can do so very much good for the world as a whole and especially for yourself and your loved ones so I will continue offering as much sage advice as I can through these articles knowing that it will benefit a few of you.

Now For A Bit Of Homework On Your Part – Please write the following phrase by your own hand in blue ink “You Are Enough” on seven pieces of paper. Put one on your bathroom mirror, one on the refrigerator, one in your wallet and the rest where you will easily see them every day and watch what happens.

I leave you with this heartfelt blessing – ”You are enough; you have what it takes to achieve your definition of success!”

Warm Regards,

Randal L. DeHart, PMP, QPA

http://www.fasteasyaccounting.com/

Pin It on Pinterest