Do you know what your profit margins are?
In speaking with pool company executives across the United States, I have found that many companies do not job cost. When they sell a pool, it is booked as a sale, and then the bills are paid as they come due. They do not review the costs of each job, therefore they don’t know what their true profit (or loss) is on that job. As long as money is flowing in and out, they have a false sense of security that they are making money.
But unless each project’s job cost can stand alone, you can go months selling pools without making money. I call that “cash flowing.” By the time you realize what’s happening, it may be too late to get back on track.
I also talk to pool builders who perform construction phases in-house. They charge cost for each phase to be able to sell pools more cheaply. But unless you charge profit for those phases, there is no money to reserve for repairs, breakdowns or overhead charges. This negates job costing capability.
Milton Friedman said, “Most economic fallacies derive from the tendency to assume that there is a fixed pie, and that one party can gain only at the expense of another.” That can be applied to in-house projects. If you charge the true cost plus profit to jobs, you will gain enough profit to cover all expenses and keep your own company healthy, plus you help balance the market by creating more realistic price expectations. Your gain doesn’t have to be at the expense of the industry’s ability to make a profit.
Do you do job costing? If not, how do you gauge your project’s success financially?
If you do job phases in-house, how do you charge those costs to the job?