H2O Magazine

Toolbox metaphor

A profitable entrepreneur, no matter his trade, will have a toolbox teeming with tools. A landscaper might have shovels, rakes, and, wheel barrows. A tiler might have grout bags, sponges, and saws. A roofer might have nail guns and ladders. Successful entrepreneurs recognize that, as essential as such instruments are, they are not the most valuable tool that one should keep in possession.

Further, A nail gun, shovel, or paint sprayer cannot help a entrepreneur to make the crucial decisions necessary to manage a successful company. They will not help him evaluate his numbers. The capacity to analyze certain crucial statistics will in the end decides the success of the entrepreneur’s business. Devoid of this ability, his talent at unclogging drains, or painting doors, or planting shrubs will not result in a profitable business.

Understanding business reports

The most obvious numbers that a entrepreneur must be able to evaluate are those on his financial statements. Knowing the distinction concerning revenue and profit, between overhead and direct costs, between accounts payable and accounts receivable is vital to make informed decisions concerning his business. Without this knowledge, one cannot grasp what rates he should charge or even if his business is making money.

Analyzing statistics

One should comprehend other, moreover less apparent, statistics. As an example, he must determine his expenditure per customer acquisition, closing rate, average job price, to name a few. This is must to make informed decisions concerning marketing and advertising and sales. He must know the manner in which all of these overheads influence his profit. If he does not know and understand these statistics, he cannot conclude which advertising is effective and which is a waste of money. His conclusions turn out to be nothing more than speculation.

Moreover, the entrepreneur has to have the skill to recognize which services are profitable and which are not, through job costing. If he does not know this, he might go on providing a service that costs him money. In addition, that cannot be beneficial for his company. One must have the skill to calculate his mark up for materials. He has to have the skill to price his services correctly so that he can fully cover his business overheads and have a positive return on his investment. If he does not know this, he is running his business blindly.

Planning

A carpenter would not cut a board without first measuring the length required. A plumber would not install a new faucet without first measuring for its appropriate position. A flooring installer would not buy supplies without first measuring the area to be tiled. In spite of that, these entrepreneurs will frequently order advertising and marketing, make deals, and make crucial business decisions while not measuring. Too often, they do not know their numbers.

Monitoring

An entrepreneur knows that if he tries to execute his work without correctly measuring he may waste supplies, time, and money. He must understand that the same is true of each part of his contracting company. If he does not properly measure certain significant activities, he will waste his time and cash. Moreover, the solitary tool to help him do that is an active and eager mind.

Every entrepreneur should effectively use business management skills to run his or her business profitably. Lack of knowledge cannot keep one in the business for long. One must measure his or her own business in every possible way to earn to sustain and grow the business.

starting a contracting business