Al Levi

This column is meant to be a resource only. Please check with your own trusted business advisers, including your own attorney, to make certain that the advice here complies with all relevant laws, customs, and regulations in your area.

Dear Al,

I buy a motor for $30 and I sell it for $100. So how come at the end of the month I didn't make any money?

Sincerely,
End Of The Month Blues

Dear End Of The Month Blues,

It's a common misconception among contractors who assume that, because they buy material for a low price, and then sell it for double or triple the cost, they must be making money. Of course, the end of the month comes and they find out they were wrong.

One of the first questions I ask a contractor who wants me to consult with them is "Have you done a breakeven analysis?" This process involves knowing all the costs that it takes to run your business, which goes way beyond salary.

The experience of doing your first breakeven analysis is very enlightening and very disheartening. When you learn what you really must charge per hour just to break even, it's very scary! But, never doing it is scarier.

To learn more, I suggest you buy Ellen Rohr's book Where Did the Money Go? and visit her Web site for some simple financial forms at www.barebonesbiz.com.

Regards,
Al Levi

Dear Al,

I went to a business seminar and the speaker said that I need to be working on the business instead of in the business. Great! How do I do that?

Sincerely,
Working Where?

Dear Working Where?,

The true progress of a company will not come from the owner doing one more service call or installation, or even from selling another $25,000 to $50,000 a year. The true progress of a company comes when an owner teaches others to do one more service call or installation, or sell another $25,000 to $50,000 a year.

You need to figure what it would take to replace yourself in the field by hiring someone (sometimes more than one person) to do that work. This goes into your overhead expense, which is all part of the process to calculate your breakeven price, which leads you to what your selling price needs to be.

What should you be doing with your time? Mastering the eight Power Concepts:

1. Leadership Power

2. Operating Power

3. Staffing Power

4. Sales Power

5. Sales Coaching Power

6. Marketing Power

7. Financial Power

8. Training Power

Please send me an e-mail and I'll send you a more in-depth explanation of each of these Power Concepts that an owner needs to master.

Regards,
Al Levi

Al Levi of Appleseed Business specializes, as his Web site says, in "Making Contractors' Lives Less Stressful and More Successful." Through private workshops, on-site assessments, customized operating manuals, and staff training programs, Levi delivers the benefit of the experience he gained from years of operating a large family-run HVAC and plumbing business. Learn more by visiting www.appleseedbusiness.com. You may also contact Levi by e-mail at info@appleseedbusiness.com or by fax at 212-202-6275.

Publication date: 12/13/2004