Measuring Up: The Power of One
"You and only you can make a difference."
"If you are not growing, you are dying."
"You can be anything or anyone you want to be."
"You are what you think about."
Whoa! Before any of my pragmatic readers throw up all over this magazine, I want to make it clear that fluff and stuff motivation is not what this article is about.
Motivational speakers will tell you that you have the power to be what you want to be and the power to make a difference and change the world. Well, this may be true, but I am not going to use such motivational rhetoric to blow smoke at you. Besides, if it were true that you are what you think about, most 17-year-old boys would turn into a can of beer or a 17-year-old girl. Such motivational thoughts can be great to get us out of a funk, but rarely do they have any real impact on our success. Rather, I would like to use the Power of One to show how close you may be to succeeding and not really knowing it. So how can One impact you?
It really is all about the math. The difference between a mediocre economic return and an outstanding return is really not as great as you may think. By looking around on the Internet and using USA Today and Bob Uecker's Baseball Statistics, I found some interesting facts. Alex Rodriguez signed a $21 million major league baseball contract for the years 2001-2004. In 2000, he played in 148 games with 554 at bats and 175 hits for a .316 batting average. One less hit per game and he would not have even made a little league team and one less hit every other game and he would have batted a measly .179.
Making a lot of money is about consistency and making the numbers day in and day out. Ron Belliard hit .263 in 2000, earning $250,000, and in 2001 hit .264, earning $310,000. Ron Belliard may have had just a few less hits than Alex Rodriguez, but his earnings were amazingly less.
Success is about consistent performance, hard work and practice-not motivation. Of course, a little luck and being in the right place at the right time does not hurt, either.
So let's apply some hypothetical statistics to a hypothetical company we will call Almost There Contracting. Our numbers are imaginary but not so unreal that you cannot see the correllation between the variables in our example.
Almost There Contracting StatisticsSales $1,000,000
Average Gross Profit: 30%
Average Job Size: $5,000 or 200 jobs per year
Closing Ratio: 25%
Number of Field Employees: 10
So how much difference would "one" make?
Assuming that Almost There Contracting could perform one more job a month, sales would increase by $5,000 a month. If gross profit remained 30 percent, then that extra job would bring in $1,500 in additional revenue. If overhead did not increase, that $1,500 times 12 months would increase profit by $18,000 per year. If crews did one more job per week, profits would increase by $78,000 (52 weeks times $1,500 a week).
If Almost There Contracting makes $1 a day more per employee, this equates to $10 a day (10 employees times a dollar). Five days a week is $50 a week, which is $2,600 a year. Change this to a dollar per hour and you have $20,800 a year.
The company currently wins one out of four jobs for a 25 percent closing ratio. If it won one more job out of four, this would put the company at 50 percent closing or a whopping $2,000,000 in sales. This would obviously be a high closing ratio, but if the company were doing 200 jobs a year at 25 percent, that means quoting 800 jobs a year or about five a day. What if, as a company, it just gave one more quote a day that would equal five more quotes per week and 260 more quotes a year? At a 25 percent closing ratio, that would yield 65 more jobs a year. Sixty-five jobs at $5,000 each would equal $325,000 in sales at 30 percent, equaling $97,500 in additional revenue.
Now the problem with all the above scenarios is that they involve growth and growth is not always your friend. So, even though the numbers are small, it may not be a realistic approach to your problem. If you grow sales you will need more people, cash and equipment (and, if you grow too much, more general overhead). What if you had one more key employee who worked hard like your best guy? Your life, your profits-everything would be better. By getting rid of one of your poorer employees and developing a key person in that employee's place, your business would improve. Yes, everyone has personnel problems, but rather than try to fix it all at once, bring one key employee on at a time.
How about just a little increase in production? What if your crews put on one more square per day? The result would have a tremendous impact on profits. Even if you pay subs or by the piece, your revenue per day would dramatically increase and profits would follow. What if your crews get out of the shop earlier in the morning? In summary, you may be a lot closer to succeeding than you might think. Look at the big picture: How many jobs can you do a year? How many people can you employ with your current setup? How can you make your estimating more efficient by having a little better closing ratio? How can you increase production just a touch? Don't get too caught up trying to double your sales and dramatically change your business. Learn to make money where you are by tweaking a key thing here and there.
Don't be discouraged and be realistic about your situation. We all think of baseball players as million dollar babies but the simple truth is that, just like contractors, most don't make the big bucks. The ones that are financially successful do so because of consistency. Contracting success is not about motivation or the latest idea but it, too, is about your consistency.