Like any responsible manager or business owner, you’ll be aware of your monthly, quarterly, and annual financial results.
While that’s great for tracking the past, they often provide too few clues about where to take your company in the future.
It’s useful to realise that the figures that really matter aren’t just those tied to the £ sign. Important figures also include things like time spent on a job, dates, and more.
They’re important because altogether these figures can provide answers to questions you need to be asking about your business.
Questions similar, but not limited to:
“Which job types and which engineers are the most/least profitable?”
“How much time are we spending on admin tasks?”
“How much time/money am I spending on travel and transportation?”
“Are we spending more than we should be?”
Some of these answers may lead you to make tough decisions about your staff or customers. For instance, you might want to stop acting on jobs that take you far away from your usual service area, as realistically, they’re not cost-effective.
Ultimately, when thinking about profitability your focus needs to be smart. and by that we mean SMART:
Goals created in this way will provide you with a well-structured plan for you and your team to follow.
Win work from repeat customers. The humble service reminder could be just what you need…
2. Take a holistic view
Understanding profitability and making money as a plumber can be more complex than it first appears.
To make sure you’re understanding your business well you need to look at it from every angle—this is what taking a holistic view means.
From administration staff to engineers, or stock control to invoicing, and beyond: these are all sorts of things that can and will influence your profitability.
For instance, consider journey times:
You may not have thought about how this metric can affect your finances. However, if it looks like engineers are taking too long to get to a job and you’re not sure why (it could be traffic, it could also be laziness) there are solutions (like GPS tracking) that can provide insight.
Having this information will then allow you (or your staff) to better manage aspects like job distribution, optimising travel time, and potentially get your engineers to attend more jobs. In this instance, statistical knowledge is power: without it, you won’t be able to start making improvements and may miss out on new revenue opportunities.
Another suggestion is for you to consider the parts you’re buying. Yes, you may be buying them at a good price and make money on markup, but what if those parts have a high failure rate and your engineers have to go out on (unpaid) recalls to put things right?
As well as costing you, it will also negatively affect your customer’s satisfaction and can negatively impact retention. What appeared at first to be a money-spinner, could actually cost you a whole lot more…
3. Get a clearer picture of cash flow
Poor cash flow can cripple an otherwise successful business. If you always seem to have less money in the bank than you think you should, it’s a good idea to ask “Why?”
In all likelihood, you have an issue (or more likely, several issues) with your invoicing and credit control processes.
On top of this, poor stock control or supplier management can lead to excess funds being tied up in inventory. This might be obvious from a trip to the warehouse, but you won’t be able to take effective action to correct the situation without detailed knowledge. With better insight into parts management, you will also be in a better negotiating position with your suppliers.
With that in mind, consider if your plumbing software allows you to easily manage as much of your plumbing business as possible (if not all of it), including invoices and payments as well as stock control.
This all ties into how you should take a holistic view of your business.
Only by understanding the big picture (and seeing it clearly) will you be able to make well-informed decisions that increase your cash flow and profitability.
While yes, this is easier said than done, you’ll likely know just how much of a burden interest payments can be.
Most plumbing companies (amongst other field service businesses) could do more to reduce their reliance on bank loans and other sources of credit.
Here are a few ideas to help out:
First, get an accurate picture of your financial situation and make a sensible decision for prioritising debt repayment i.e. tackle the highest-interest debt first. Otherwise, it’s just going to pile up year-on-year. If your business is going through a tough patch (and everyone’s will), talk to your creditors, they may be able to help.
Next, make sure you can keep your end of the bargain on any new repayment terms—if you default, that will make future loans more expensive as your credit rating suffers. At the same time, you should be looking for sensible ways to cut costs and free up cash. Most companies can identify equipment that’s no longer used and sell it off: even as scrap, that’s better than leaving it in storage as useless clutter.
You’ll be far more likely to secure better repayment terms if you can demonstrate a thorough understanding of your company’s current situation and an action plan to turn things around. You can put everything we’ve covered so far into practice to give yourself the best chance of staying on top of debts.
5. Improve communication through automation and by gathering reviews
Service reminders are perhaps the best (and simplest) tool to help grow in this way, but you should also consider channelling other communication methods, like online reviews.
We’ll consider both, briefly, below:
• Service Reminders:
Unsure of how you could make use of service reminders?
Well, as a plumbing business, consider how the servicing of boilers could fit in. Boilers may typically come with a standard one-year warranty, but buyers can purchase extended warranties from two to ten years—if they do that, they’re required to have the boiler serviced yearly in order to keep the warranty valid.
That’s where you come in: with a service reminder, you can easily notify clients to book an appointment. Schedule enough of these regularly (easily automated, too), and year on year, the results will speak for themselves.
If that sounds good to you, we’ve got more details here if you’re curious to learn more about how automated service reminders can help increase your profitability with our calculator. Alternatively, if you’re looking for help navigating pricing conversation, look no further than the banner below!
• Customer Reviews:
Hearing from your customers can help in surprising ways. They’re the people who use your service after all, so gathering feedback and listening to their pain points (or their praise!) can help you improve customer relationships and even increase retention.
Encouraging feedback means more publicity for your business as well, whether it’s through word of mouth, or online with reviews.