Program Teaches Contractors About Finance
According to Bryant, the software-driven workshop analyzes the dealer's financial strengths and weaknesses, and provides strategies for improving the business. The program is designed to help dealers:
Dave Taylor, co-creator of the workshop program, said there are two main items contractors should get out of the workshop.
"They should learn how to price their services, whether it is pricing a job, pricing the parts, or pricing the labor rate," he said. "The second thing is knowing the efficiency of the labor, i.e., tracking unapplied time, tracking costs, etc."
Some of the first things contractors ask upon entering the workshops are: What is a cash flow statement? How do I departmentalize my business? How do I know if my service labor rate is correct? Is flat rate pricing for me? What is unapplied time and how do I track it?
Taylor said it is important that contractors know how to price their jobs. "I've been doing this for 20 years and if I ask 10 contractors how to price a job based on their overhead, six would price it wrong."
The workshops are arranged by local distributors who work with their dealers to fill up spaces in the program. Karl and Penny Skog, owners of Crosslake Sheet Metal, Crosslake, Minn., were two of approximately 25 to 30 people who recently attended the workshop in their region.
Karl Skog, whose successful 30-year-old company works in the residential new construction and service/retrofit markets, said he couldn't even "turn a dime" in the service department until he learned some valuable lessons from the workshop.
"We had heard a lot about Dave and wanted to attend his class," said Skog. "Our distributor, Auer Steel, brought in Dave and made him available for the contractors in our area."
Some of the key lessons that Skog took away from the workshop involved departmentalization and pricing.
"We have been a profitable business, but I intend to be a lot more profitable based on the tools for pricing that Dave teaches," Skog said. "He gave us a worksheet on which we listed our cost of equipment, overhead, and labor rate - and the percentage of profit we wanted to make. He asked us how we would price a job based on that percentage.
"Out of the 25 or so people at the workshop, only two people got the right number. I was one of the two. Dave asked the other people how many number of jobs they could afford to give away before they went under."
Skog said the workshop was a real eye-opener. It taught him how to understand ratios, which explained the breakeven point of pricing and how to make a profit on parts, labor, etc.
"My wife took the ratios and ran them on all of our departments," Skog said. "This showed us that we're doing great in some departments and where we needed to improve in others."
Publication date: 12/20/2004