The Business Of Staying In Business!
When putting a quote together, it’s important to keep all aspects of the job in mind and include them in your quote.
Things to consider
Things like; vehicles, petrol, tools, parking, tolls, insurance, rent, wages, marketing, phones & internet, uniforms, bookkeeping, accounting, admin and your salary if you’re on the tools and working in the office. Most of these things should be part of out-going quotes.
The sum you’re left with after factoring in the above costs, is your net profit. If what you have is a dollar value, it’s net profit and if it’s a percentage of the total turnover its net margin.
During the course of a job, you might also have mistakes happen and normally the cost of paying for those mistakes will come out of your profit.
So let’s say that you feel the need to be “competitive” during this never ending pandemic and feel you need to drop your prices or give discounts (both things I advise against doing). Then generally speaking, you’ll eat into your profits even more!
If you don’t already have this in place, you should set up a system that tracks your costs so you can see what you’ve had to spend vs what you’ve actually made on each job. This will help you put better quotes together that give you a clear understanding of what to charge customers.
The same principle applies when someone asks you for a discount. You should have a clear understanding of whether you can afford to reduce your price and where it can leave your business financially if you do.
Being numbers savvy and truly understanding these principles will go a very long way to making sure you stay in business.
If you enjoyed this article or found it helpful then make sure to check out some of our other blog posts. Why consider a business health check or the Bank account theory vs Financial statement theory.