Are you a contractor stuck in an endless cycle where time is lost and money is wasted? Do you need to restructure your operation in order to focus on the business itself rather than on the manual work? Don’t worry, Profit First for Contractors is the perfect solution for contractors including designers, tradies, couriers, business owners in the beauty industry, and more.
If you are unsure of whether you are an employee or a contractor, make sure to read our most recent blog post, ‘Are you an Employee or a Contractor?’.’
Our other previous blog posts have established that Profit First is a book and methodology created by Mike Michalowicz. The groundbreaking financial methodology ensures that your business will not lose profits, no matter its size or industry. The technique prioritises profits over expenses, creating sustainable income and profit. It helps business owners get out of debt and addresses unhelpful money management habits enabling business growth. Profit First gives clarity on business budgeting by stabilising cash flow and reducing the ‘feast-to-famine’ cycle. Profit First improves your cash flow by prioritising profits over expenses. The multiple bank account system ensures that your profits do not decrease because they have been separated from money that is available for expenses. It’s simple, yet incredibly effective.
Ready to revolutionise your business's financial approach? Join us on a journey to financial success by embracing the Profit First Methodology. Partner with us now and pave the way for a brighter financial future.
‘Profit First for Contractors’ is a book written by Profit First Professional, construction business coach, and international keynote speaker, Shawn Van Dyke. Shawn takes the core concepts from Mike Michalowicz’s Profit First and adapts these concepts to address the specific needs of the construction industry.
The contractor cycle describes the frustrating and vicious money depleting pattern that too many contractors find themselves stuck in.
Symptoms of the contractor cycle include:
If you can relate to any of these symptoms, it’s time for you to get started with Profit First with the help of Profit First Accounting & Coaching.
When you start using the Profit First method, it’s normal to take a few months before you start feeling like you’re making progress. In our experience, the materials and subs account is often the most challenging for contractors. Initially, this account may need to be slightly a higher percentage, whilst you catch up and get into the regular cycles of profit first.
If you find this challenging, working with a Profit First Professional like us can really help. We can assist in figuring out the right Profit First percentages for your business, plus implement a plan to ensure you are heading in the right direction.
By getting this kind of outside help, you can speed up the learning process and smoothly incorporate Profit First principles into your business. This collaboration could lead to better and consistent profitability for your organisation, helping you to get the hang of Profit First and its benefits sooner.
Another common challenge for Contractors during the Profit First implementation is how to manage existing debt.
Profit First will not only allow you to be proactive with your finances moving forward, but with the right percentages you will also be able to tackle your debt. Profit First can be a helpful strategy in managing and ultimately reducing debt by providing a structured approach to your finances that emphasises allocating a portion of your income towards debt repayment.
Profit First utilises the debt reduction method, ‘The Debt Snowball’. This involves listing your debts from smallest to largest and prioritises paying them off in the same order. The focus becomes paying off your smallest debt whilst paying minimum payments on all others, until the smallest debt is gone. This process is repeated until all debts are paid off.
It’s important to note that while Profit First can provide a structured framework for debt reduction, the effectiveness of this approach also depends on your commitment to consistently following the allocated percentages and making sound financial decisions. If you have substantial debt, it may also be beneficial to consult with a financial advisor to develop a comprehensive debt repayment strategy tailored to your specific situation.
Retention is a common practice in the construction industry. It involves holding back a certain percentage of the total payment that a contractor or subcontractor is supposed to receive. This withheld amount is held for a while after the work is done. The main reason for doing this is to make sure that the contractor or subcontractor finishes their job properly. This includes fixing any issues during a specific time after the work is completed. This can impact cash flow for contractors and needs careful planning. A Profit First Professional will be able to assist you in working out the best way to manage your finances, minimising the impact on your cash flow.
If your retention isn’t released, inquire promptly for reasons. If no valid cause exists for the incomplete payment, help is available.
If you are suffering symptoms of the contractor cycle, it’s time to let us help. Get started with Profit First today by calling 03 5979 2671 or book a free consultation online, here.
Ready to revolutionise your business's financial approach? Join us on a journey to financial success by embracing the Profit First Methodology. Partner with us now and pave the way for a brighter financial future.
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