What percent of every dollar did you keep this year?

A remodeling contractor. His goal for the year was $1 million in revenue. By September he was at $1.1 million.

His other goal was 20 percent net profit. He was at about 14.

Both things are true at once more often than people think. Revenue grows, subs grow with it, overhead grows with it, and the margin stays where it was or slips. The bank balance looks great. The percentage doesn’t.

The fix was not in the books. The books just showed it.

If he raised every bid by 1 or 2 percent and nothing else changed, his profit would go from 14 percent to about 16. That is money straight into his pocket, because the costs don’t move. Add some discipline on scope changes, the small extras he admits he eats instead of billing, and I put it at an extra $15,000 to $30,000 a year. About the size of his tax bill.

There was a second problem underneath. His job software showed what he bid on each project, not what he actually paid the subs. So he could see revenue by job but not profit by job. He knew his overall margin was short. He could not see which jobs made it short.

To be fair to him, 20 percent may be the wrong goal on his biggest jobs, where most of the work is subcontracted. That’s a real argument. It is still a reason to know the number job by job, so the goal can be set by the kind of work.

What to do before year end:

1. Pull your net profit percentage for the year. Not the dollars. The percentage.
2. Compare it to the number you wanted in January.
3. Pick your three largest jobs. Put the bid next to what you actually paid for labor, subs, and materials.
4. Write down every change you did for free this year. Price them.
5. Set next year’s bid increase before January, not after a slow spring.

In QuickBooks Online, go to Reports and open Profit and Loss for this year to date. Click Customize, and under Rows/Columns check % of Income. The last line is your net profit percentage. Put it next to the number you wanted in January.

If you want to see your margin by job, start the 5-minute intake.