Here is something I was working on the other day. It is our average month (with just crew 1). It"s not a bad one, it"s not one where we get a bunch of emergency work and we can charge whatever we want. What has happened is that we run two crews for a little, and then lay off two guys and merge the left over guy with crew one. I want to run two crews all year next year.
In terms of discretionary income, business brokers determine it to be the net cash flow of the company + debt payments + payments to owner + misc payments. So in this month, the discretionary income is 12 + 7 + 4 + 1= 24k. That"s usually what we do from crew #1.
When we have two crews, its like the first crew covers all the bills of the company, and the second crew is pure profit. No, don"t take me literally on that, but it sure is a hell of a lot profitable. I"ve made 40k net (before discretionary income addbacks) on 80k in sales. And when we"ve done 150k in a month in emergency work, I"ve made 70k before discretionary addbacks.
My goal this year is to do enough advertising to be able to keep the second crew out all year. How am I going to do that? Like I said, we have an adjacent city of 150k that we"ve ignored. I"m going to spend 20k in advertising in that city next year. I"m also continuing to target high net worth individuals, which is why we just bid a 10k and 20k job this week. We want the Doctors, Lawyers and Businesspeople that will sign up for 5-10k in work a year. These are the people that have huge projects and acreage, and they can"t do it themselves. Just 100 of these people at 5k a pop would get us to our goal. We just joined a country club where there are 500 members that are this target demo, and we are networking as well as looking at doing sponsorships. And there are thousands of them in this area. We don"t mind normal customers, it"s just easier to go with rich people because while they might be particular, they always pay. Our default rate of someone with a 300k+ house is 0%. They are too concerned about their credit.
I"ve heard that most small businesses never get to one million in sales (like 5%). It"s even harder for us that we are a service business. But my goal is to get there, and its why I"ve increased our sales dollars tenfold, and we are in every medium but TV. I may start up TV next Spring. I did an analysis on it, and for every dollar in advertising I"m spending, I"m getting sixfold that in sales. It could be better, I"m constantly working on my people"s salesmanship.
We"ve done 800-900k in a year where there is a lot of emergency work, but we haven"t had emergencies in three years. We"ve made the profitability I"ve shown in those years. When we get there consistently, we won"t need a bank for anything, we"ll (as in my family) will be our own bank. Screw a loan.
It"s frustrating because we"ll do two crews for a few months, and then have to layoff. I don"t like doing that, and advertising has helped smooth things out. I don"t want to just keep six people employed all year, and cut the other guys. But I don"t have a choice. We are backlogged a month, and losing 2k a week in cancellations because people got impatient. In the Summer, we were losing 5-6k some weeks because people wouldn"t wait. One day I"ll figure out how to smooth supply and demand. No one in my industry has so far. I"ve been able to make the low months increase by 100% in revenue, and we"ve worked now 18 months in a row every day. Most of of competitors have only backlog for the day. They wake up every morning with no work. No thanks.
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