Outcomes Vs. Activities
We need to distinguish between outcomes and activities.
You can shoot the puck at the net (activity) the outcome is a goal, a miss or a save.
The goalie’s outcome is to save. Yours is to score.
The more often you shoot and the greater the skill you use (these are your activities) the greater are your chances of scoring and scoring often (these are your preferred outcomes). But you have to remember that the goalie is there to thwart your preferred outcomes (his outcome is measured in salves). There will always be obstacles in your way. Some, like a goalie, are easy to see; some are camouflaged. There always seems to be someone out there who has desired outcomes that are the direct opposite to yours. A sort of ying and yang, I guess.
In business profit is an outcome. You can’t control the outcome but you can control the activities that will generate the outcome. Again with the right activities, well executed, your chances of generating good profit become greater. The “goalie/obstacle” is often your competitors, your employees, even your clients and strangely enough even yourself. These elements can hinder you from achieving your outcomes. Harness them correctly and they will help you achieve your outcomes. Make sure that all the people on your team are really on your team and committed to the company’s success. You can’t afford to let them make stupid mistakes and spend time in the penalty box. Remember, it is your fault when things go wrong. Don’t blame anyone else. Take responsibility; take control.
So, for successful contractors, what are the right activities and what does “well executed” mean? And what’s a good profit (the outcome)?
Let me start with the outcomes.
Over the past 27 years I have done some 34 benchmark programs for construction associations in both Canada and the US. The majority have been for mechanical trades (Plumbing, HVAC, refrigeration and sheet metal) while others have been for general contractors, roofers and fireplace contractors.
This has exposed me to some 1,300 sets of financial statements for contractors and to the owners of those firms. In addition, through my accounting and consulting practices I have had access to about the same amount again. I get to have discussions and reviews with most of the owners. Through my speaking work I get access to many more contractors.
The benchmark programs show that 25%of trade contractors make more than 10% pre-tax profit (after normal owner/manage salaries). The top 25% average around 14% pre-tax profit. This is the outcome that you should be aiming for.
Are you better than average? If so, you should be consistently making more than 5% pre-tax. If you are in the top 25% then you should be averaging a minimum of 10% pre-tax.
Most contractors work in a fairly isolated environment. They don’t really know what their competitors are doing that is making them successful. We see the nice trucks, the fancy websites, the nice car the boss drives etc. etc. However, those are not real indicators of success. It is very difficult for a contractor to really know what is going on in his industry.
If you are a Canadian HVAC contractor you should participate in the HRAI benchmark program that I am doing right now.
Our close off date is July 12th. Email me and I will send you the relevant details. Find out what outcomes you should be aiming for, identify what is realistic within your industry segment. Then you can implement well executed activities to reach your outcomes.