One of the fundamental reasons why so many contractors aren’t making the money they want, is simply because they aren’t tracking their numbers…
But with so many numbers in the business, which ones should you track???
Well, a simple metric that we get some of our clients to track is their…
Daily Gross Profit Target
Setting a Daily Gross Profit Target is a great way to cut through the noise and give you a simple and tangible metric to track your business with.
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Note: When we say Gross Profit, we’re talking about the profit leftover AFTER labour and material costs have been paid. For example, if you quote a job at $1,000, and there’s $600 in raw labour and material costs (no markup), then your Gross Profit would be $400.
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For example, let’s say annually:
- You want to achieve a pre-tax profit of $50,000 (on top of your fair market wage), and
- You’ve got $70,000 in overhead costs to cover
That means, you’ve got an annual Gross Profit target of:
Annual Gross Profit Target = Pre-Tax Profit Goal + Overhead Cost = $120,000
To break that down to a daily target, simply:
- Divide the annual target by 12 months
- Divide the monthly target by 20 workdays
In our example, that comes to:
- $120,000 / 12 = $10,000
- $10,000/20 = $500
That means, for you to make $50k in Pre-Tax Profit AND cover $70k in overhead costs, you need to make $500 per day in Gross Profit.
So, if you’re hitting $500 or more every day, great, you’re on track with your annual goals!
But if you’re not, then you’ve got work to do to get back on track!
And the best part…
It doesn’t matter whether you’re hitting your Daily Gross Profit Target from $10,000 in sales per day at a 5% Gross Margin… OR $1000 in sales per day at a 50% Gross Margin…
The target of $500 per day in Gross Profit remains the same!
How you achieve that target is completely up to you...
If you're an electrician, plumber, painter, carpenter, or any other trade business owner who is looking to take their business to the next level, click here to learn more about how our team can help!
