What does it mean to be "Profit Happy?" Profit Happy is when you have your business operating on all cylinders.
It means you aren’t losing sleep about bills and expenses. It means you are free to make conscious well thought out business decisions.
There is one honest truth about profit. When you have it, you are happy and when you don’t you aren’t. Profitable companies grow and flourish while unprofitable companies stagnate and decline. Are you Profit Happy?
Maybe you are thinking, “what is a good profit for a Landscape Maintenance company?” Early in my career, a mentor of mine, John Cipkala, shared that anything less than 15 percent profit is unacceptable. John lead the most profitable region in our company for many years. Since joining The Grounds Guys, I have reviewed financials with profit results well over 20 percent. Those owners were Profit Happy!
In previous articles, I introduced E + R = O. So what should your “R” to a low profit be? To achieve Profit Happy status, you must strive to excel at four simple things.
- Keep your overhead and debt as low as possible.
Be frugal. Challenge your spending decisions by only focusing on the needs, not the wants.
- Operate with a high level of efficiency.
Labor is your biggest expense. Manage it and you will drive money to the bottom line.
- Drive sales beyond your budget.
Leverage your overhead costs. Once they are met, all revenue beyond drives more money to the bottom line.
- Provide “out of this world” service.
Happy customers mean returning customers. Happy customers drive referrals. Referrals are low-cost leads.
Let’s say you have applied these recommendations and are seeing your profits rise. Your bank account is growing, and you are starting to feel “really” good. Your next “R” should be one of these 7 things.*
- Reinvest Back into your Company.
Upgrade your equipment with a focus on improving operational efficiency or cost reduction.
Invest in your people. Wages, benefits and training opportunities are a couple suggestions.
- Save for a Rainy Day.
You should always maintain three to six months of operating expenses in reserve.
- Reduce Business Risk & Debt.
Pay down long-term debt, beginning with higher interest loans.
- Pay a Dividend.
You worked hard to build your business to get to this point, it is ok to take some of the profit for yourself.
- Acquire a Competitor.
Growth through acquisition is a great way to invest your profit.
- Invest in Land, Stocks and/ or Bonds.
Look for ways let your profits appreciate in value.
- A Combination of the Above.
It is wise not to put all your eggs in one basket. Consider a combination of the above.
*No matter what you think might make sense when it comes to using your profits, you should always consult a tax professional. They’ll be able to help you determine the best use of the money for tax purposes.
Your Franchise Business Coach (FBC) is focused on helping guide and mentor you to achieve Profit Happy status. Please take time to discuss with them where you are on the Profit meter.
One last thing … Don’t accept less that 15 percent profit for your company. GO GET HAPPY!