Ep 8 Part 3of3 The Profit formula for Woodworkers

Ep 8 Part 3of3 The Profit formula for Woodworkers


Hey everybody it’s Dominic Rubino from
cabinetmakerprofitsystems.com thanks very much for joining us here I
appreciate having you with me this is part 3 of 3 and it’s okay if you checked
in here we’re talking about the profit formula today the other videos and
audios are for the revenue formula and the customer formula and they’re at
cabinetmaker profit system com go back download them or download the big word
document there you can print that off share with your business partner share
with anybody you like really and have a conversation about how to grow your
woodworking joinery business and and it’s worked all over the world for other
other woodworkers and joiners I’ve worked with people in the cabinet making
industry for years and years furniture makers casket makers guys that make pool
and billiards tables this the basics of business all work the same and I’ve been
able to use that with different business owners over many many continents over my
18 year career as a business coach now I’m not a theoretical business coach I
have no time for theory I think it’s BS I also what do you how do you say it I
eat what I produce I believe in this stuff I’ve built a number of companies
myself to the most notable we’ll just do it by employee size one of them I got up
to 240 employees before I sold that business the other one I got up to 240
franchisees before I salt that business and the 240 franchisee business was one
where I was running a global business coaching organization training other
business coaches on how to do what we’re talking about here and I was able to
work with a very famous author known as by the name of Brian Tracy some of you
may have read his books or listen to his audios or gone to some of his workshops
and seminars so I was the guy that ran the franchise side of the Brian Tracy
operation and I trained all those business coaches around the world blah
blah blah doesn’t matter here’s what’s happening today so we’re talking right
now about how to double your income double your time off as an architectural
woodwork or cabinet maker furniture maker etc I’m following along the actual
document that you can find on cabinetmaker profitsystem comm so please
feel free to go back there download the the document if you’ve already
downloaded that document I said if you don’t like reading which I get come here
and watch the video or you can listen to this as an audio because I’m gonna make
this as an audio as well in case you’re doing something else mowing the lawn
just out at the driving range you want to listen to something while you’re
doing it people listen to podcasts everywhere we’re gonna make it a podcast
so you can listen and learn as you go in your trunk doesn’t matter so we did
formula number one which was the customer formula already done formula
number two which is the revenue formula formula number two merges into formula
number three so we had how to get more customers how to get more revenue and
then the third one which is profit and profits the cash you take home in your
jeans so you can buy a bigger boat a nicer boat on a prettier Lake with a
better cabin you got two and a faster nicer looking truck with more doodads on
it right so that’s my job I’m the guy that people call and they want to do
that they want to make more money and have more time off to enjoy the life
they’ve built and worked so hard for I’m gonna try and keep this around ten
minutes and we’re already two minutes in so I better get to it
you’ll see me scrolling through because I’m reading as they said the document
okay so listen we already made a small change and we got some great results on
the revenue side we when we and on the customer side when we started the number
of jobs we were doing was thirty with a 10% increase in leads and conversion
rate we’ve got it up to thirty six point three jobs per year okay so if you want
to know more about that go back and watch video number one or go back up in
the document and look at the customer formula for that then we looked at
average price per job now obviously it’s an average and all those of you
listening have different job ranges with different components to it I get that
but we picked the number 100,000 because if you’re driving I don’t want you
working on your calculator trying to figure out if I made a mistake on the
math doesn’t matter the formula works regardless of the size of your business
okay so the average price per job before you started was a hundred thousand
dollars per job yours could be ten thousand dollars could be a million
dollars doesn’t matter but what we do then is we apply some strategies that I
know as a business coach to say how do we increase that by just 10 percent
because I don’t want to break your company I just want to move it a little
bit in another direction so we make a 10% change in the average
price per job that maybe is a great question for you to think about today
after you listen to this audio or watch the video what can I do as a business
owner to increase my average price per job from a hundred thousand dollars to
adding 10 percent and so in this case we got you up two hundred and ten thousand
dollars on paper then we looked at the number of jobs per customer per year and
it currently was when we started it was one and then by adding a 10% difference
in the number of jobs per customer per year we got it to 1.1 which doesn’t
sound like much but when you go back and look at the document you’ll see that the
company you started with was doing 3 million in revenue per year and now
you’re up to four point three nine two million per year which company do you
want three million dollars or four point three million dollars and of course you
don’t want to work more doing that this all these changes were talking about
nothing’s different in your company you’re still in the same building same
guys st. payroll system same time and
attendance system all of that is still the same you just started to work on the
internal systems to make your system spit out what you needed to remember
you’re listening to this is you want me to show you how to double your income
and double your time off and that’s what we’re doing right now okay so there you
go you’re almost at four million bucks just by putting these simple changes in
place they’re simple but they’re not necessarily easy you also have to know
which order to do them in and if you want to know more about that leave a
comment or come back to the website shoot me a note Megan can watch history
as we need to okay but just by changing small things in your business look at
your average number of jobs average price for job number of jobs per year
you can increase things and the reason this works is because it’s not about
working harder which is what got you to today it’s now about working smarter you
know people say I want to get to the next level getting to the next level
doesn’t mean you’re gonna be able to run faster harder longer already working all
the hours of the day already put your entire life into this business I don’t
want you working more now it’s time to work from the neck up more and so they
work smarter not harder so we’ve got a couple of important
things here make sure you go back and download the document if you and a
business partner want to walk through this it’s a great document for both of
you to read if you’re on a growth trajectory you
you’re a sole owner of the business then just go grab a coffee glass of wine
glass of scotch whatever you like to do a smoothie and and just sit down with
the document and consider it so all you got to do man just consider it just let
another way of thinking come into your mind because you think about producing
cabinetry all the time and I think about Business Improvement all the time so dig
into what I do so that you can leverage that knowledge for yourself okay
so the profit formulas like this it goes revenue which was the output from the
revenue formula video number two minus cost of goods sold equals gross profit
once we have our gross profit we then subtract our operating expenses and that
equals net profit which is cash in your jeans now some of you are far better
accountants than me which is easy because I suck as an accountant I’m not
an accountant but I hire people who are accountants to tell me the information I
need and I would suggest you do the same thing but the formula is really simple
don’t get caught up in the definitions you can go to your financial
professional say what’s our cost of goods sold for the year what’s our cost
of goods sold on that job and they’ll be able to tease that apart if they can’t
then make that a little inside project where you and your accountant to your
CFO your bookkeeper find that number it’s really important right you want to
take your revenue and the first thing you subtract is your cost of goods sold
this is where our business is a little bit wonky and the reason it’s wonky is
because you could be you can have a couple of desks you’re making it a
mahogany and Cote right next to regular melamine jobs right regular plywood jobs
for obviously I don’t know but the cost of goods sold can be really wonky and
that’s why profit is the only measurement that makes any sense at all
in our business its profit profit for job internal efficiencies can sometimes
bring you more profitability than getting more in bigger jobs and you
control that environment you control everything right the way the shop is
laid up which guys are working where which jobs you’re putting in the process
where you’re doing what all that stuff is under your control right you can’t
control the humidity on site because it’s delaminating but you can control
everything in sight right and so you need to have all your systems in place
so that if it laminates on-site you’re able to say
look we use humidity controls internally and that shouldn’t happen go look at
your own site for that answer you guys already know these things right so we do
the same thing here on the business side D into the things I’m sharing with you
because I want you to improve your business you want to listen to this
section if you’re working way too hard for the money you take home okay you
probably are working way too hard for the money you take home because that’s
just your nature you probably built this business to where it is today by doing
that or you work side by side with your dad your uncle your cousin your friend
or somebody and now you bought it from them and you’ve already worked like a
dog to get where you are so this is an important section an important piece of
info for you if your shop is always busy but cash is always tight if you’re
flirting with bankruptcy by the way that is not a pretty girl bankruptcy is not a
pretty girl to not flirt with her but if your shop is always busy but cash is
always tight if you need to invest in other business tools but where’s the
money if you need another CNC where’s the money if that glue pot keeps going
you just need to change it but you just can’t find the money to do it
where’s the money that you want to listen to this section because the
changes there will spit off the profit you need hey what about you what if you
need to take a raise but the funds aren’t there maybe you’re taking care of
aging parents maybe you’re taking care of both your parents and your wife’s
parents and that’s putting huge strain on you financially I get it I mean this
is a reality of the world we live in now and the ages we are and if you have that
in place the easiest thing for you to do is go back and look inside this profit
formula okay the money is already in your business you can tease it out as a
matter of fact there’s some other articles on cabinetmaker profit system
for you on that so feel free to go there get all the stuffs free go download it
it’s it’s great information use it and put it there for your benefit hey maybe
you’re having kids you need more money that’s a little more happy thought and
if that’s the case feel free to go back and download the information and put it
in place if the bank says you need to fix things or your loans are at risk
then you could probably want to be listening to this section too and more
importantly and more fun if you want to buy cool stuff and go to nice places if
you deserve a new skidoo and a new boat and a new cottage and a new
truck to get there and you deserve to golf in the Maldives because you do well
then this section is good for you okay I don’t know if they even have golfing in
the Maldives scuba diving in the Maldives is probably very nice alright
look strong leaders have always sought a wise counsel that’s just the case that’s
presidents always have people in the background not the guys in the glasses
and the earpiece those guys will shoot you I mean the other advisers back there
presidents of countries prime ministers kings and queens their job description
is pretty basic runs country the coach of your favorite sports team whether
it’s football hockey soccer whatever it is their job description runs team
that’s their job description job description of a business owner runs
company the guy with the smallest shortest job description has the most
important job and that’s you my friend and inside this formula is where you get
the things the information you need you route the company properly okay profits
not the only measurement but it’s the last thing measured after everything
else gets done okay so here’s how the profit formula works you look at your
revenue so let me go through for you if you’re listening to this the revenue
last year was three million dollars the cost of goods sold was sixty two percent
of revenue which is one point eight six million and that leaves you with a gross
profit of one point one four million then your operating costs were twenty
seven percent of revenue and that’s eight hundred and ten thousand and so
now your net profit which is your cash in jeans from a business that did three
million dollars is about three hundred and thirty thousand dollars a little
greater than ten percent now this is where it’s important that you go back
and look at the document which you can print out for free off cabinetmaker
profit system calm because it’ll show you things laid out nicely and you can
scribble in the margins if you’re wondering where I got the number
sixty-two percent or twenty seven percent I use financial benchmarking
tools that I get from CPAs and CGAs throughout the country when you submit
your taxes when anybody submits their taxes it goes through a CPA or a CGA and
when they submit it to the government it goes through an intermediary software
program that software program pulls out certain data that I have access to and
it tells me in our industry that most companies have a 62 percent
company’s liquors 62% cost of goods sold and they have operating costs at about
27 percent now if your numbers are higher lower than that you might be
thinking I don’t need this clown lawyer numbers better
well that’s fifty percent right so just thinking about cost of goods sold the
average company has a cost of goods sold of 62 percent of top-line revenue that
means 50 percent of people have better than that and 50 percent have worse that
they suck worse okay so if you find yourself in that 62 percent range please
don’t pat yourself on the back think you’re doing well my friend you could be
doing better and some of the things we’re talking about here you’re
obviously open to learning though so that’s great so you could be doing those
things better so if you want to know more about it leave me a note here go
back to the website do what you need to to get in touch with me and I’ll walk
you through those reports they are available they’re just not available to
everybody because it’s tough to get them unless you have the right programs to
download the information that’s appropriate for you guys so listen can I
pull all this info from QuickBooks wave freshbooks whatever you use yeah you
can’t you still need to know the inputs and the reason is because information my
friend is power information is power the more info
you’ve got the more power you’ve got so let’s look at some of these things
revenue we define that one in the last section revenue is the sexy number we
all want to talk about and if that’s the case that profit profits the loans
you’re a my friend I said it alright now we’ll subtract the cost of goods sold
and this of course is where our industry where our industry gets wacky because
the prices of our different input products could be all over the place
girls profit minus operating costs equals our net profit and operating
costs look I’m not an accountant your accountant can walk you through this
it’ll be a very interesting and boring conversation interesting to them boring
to me and you but it’s important because this is where you add up your labor
rents insurance and other expenses now some guys will take those costs and add
them to their quotes as a man hour or a man day and we’re going to be dealing
with that a lot here on cabinetmaker profit system com how are guys measuring
matter of fact if you’ve got thoughts on how you measure how do you charge for
your shop do you just call your shop a man and charge it out on an hourly basis
do you know your costs right down to the penny
so that you can add it to any job on a man hour or man day basis that’s a
really good way to track things and if you do or don’t do that let me know I
love to hear your take on that that’s not the only one out there doing this
but if you want to if you if you want your net profit to go up of course you
do here’s some things I want you to do okay so here’s the action items number
one so share this with your partner share with everybody like print it out
go back and look at the list grab a cup of coffee a glass of wine glass of
scotch I don’t care but this is this is the meat of the whole thing here
carefully very carefully pick apart your cost of goods sold and I want you to
question everything I want you to question your cell phone plan your
internet plan who’s doing your on-site security question all the software
as-a-service products you have do you need them all look at your cost of goods
sold set a time aside some time to have a meeting with your account your
financial person to pick that apart let me ask you this are you negotiating hard
with your suppliers for every deal is your company at the point now where
you’re inviting suppliers in to have a review of all the jobs you’ve built and
ask them to justify their pricing to you and in each of those meetings you should
be telling them it’s time for us to get a new level of discount because it is
and Dom said so so you tell them that call your vendors tell them you want to
prepare an account review see how much you spend right have your accountant or
bookkeeper check to see if they’re giving you standard pricing when the
vendor contracts or agreements are are built or if they’re giving you something
else so did you get an agreement and are they charging the way that everyone is
have your account your bookkeeper somebody internally do that for you and
then report that back to you you will be surprised at what you find look at your
operating costs line by line is your landlord charging you for something he
or she should not be is the city charging you for something he may they
should not be have your accountant not you I want somebody else to do it have
your accountant call up the vendor for each line item and tell them your
company wants a discount every single line item now the reason I don’t want
you doing it is in case it gets to a level 2 conversation then it can
to you but first to see if somebody else in your company can get that discount
for you make it a fun thing you’re gonna be able to find money right there on the
expensive side right away I want you to do this as well and and please write
this down even if you don’t do the rest of the things please make sure you do
this one thing this one you got to do okay this is the big one this is the one
conversation you’ve been waiting for have your accountant prepare a report
and that report is called days cash outstanding that report days cash
outstanding sometimes called DC oh it’s not very creative for this what’s called
DC Odie’s cash outstanding it’s gonna tell you who owes you money and how old
that receivable is you need and deserve that money so call that person that
company and ask for it today okay there is money out there right now that you
guys have built and installed that you have not yet been paid for go get it and
that goes with change orders as well right the other thing this is gonna take
you a little bit longer maybe maybe you’ve got some funds to do it
I’d like you to buy your building and stop renting buy your building and stop
renting my uncle once told me that when you rent or when you buy real estate
your cost change because when you rent everyday is the most expensive day in
your business but when you buy your building the most expensive day in your
business is the first day and every day is you pay down your principal and
interest it gets cheaper and cheaper the second thing it does and this is really
long-term planning is that one day if you go to sell that business you can
sell the company but keep the real estate so now you become the landlord
giving you some passive revenue while you are fishing in Cabo and somebody
else is running the company out of the same building it used to run it in so I
want you to buy your building and stop renting whoa look there’s more
information here I can’t go in we worry at almost 18 minutes on this video it’s
a little bit long but I do want you to get the information so go back to
cabinetmaker profitsystem com print off the report if you already printed off
the report you’re here for the audio we’re gonna be doing much more audios
digging into some of the house and the wares of the whys of this so please keep
checking back I appreciate your time because I know you’re busy I know
you’re busy because you’re building great stuff and you take pride in what
you do and so I very much appreciate the time you’ve taken here please do me a
favor share this information with somebody else we need to know it we all
need to know the info it’s just the basics about a makeup business run
better right so share with your business partner share it with other people on
Ali or ah Mac or your joinery Association whatever it is kitchen and
bath Association but let’s get more people knowing how to do these things
better so that we can all improve all right thank you so much for joining us
here any questions please leave a comment or at least like this video or
like this piece of material so that I know that I’m going on the right path
and adding value of the way I want to – and for you my name is Dominic Ruby no
I’m with contractor profitsystem comm and I look forward to hearing your
stories of success about how you put these in place have a great day and I
will talk to you soon

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