Hey there, Marty from The Professional Builder. And what I wanted to do today was share with you some key strategies around taking action. And specifically, the critical component of knowing and understanding your numbers. And what’s it costing you not knowing your numbers, and what’s it costing you not taking action? And today, gonna run through some examples I think you’ll find massively helpful that you can do to make some massive gains in your business. And one of those things is to discover, where are the actual gaps or the holes in our proverbial bucket? So no point in turning on the taps, doing lots of marketing, doing lots of sales, if you should figure on fixing your gross profit margin first. And the efficiency of your guys on site. So, let’s have a look at some numbers, and what we could do if we actually improve them.
So, the area that you should focus on is, what area is the weakest? ‘Cause that’s gonna give you the most opportunity, and that’s also probably the biggest constraint in your business that’s stopping you moving forward at that stage. And how we go about doing this is we see, where are we currently, so we need to test and measure. Next key point is, we set a goal for what we want this to be in 90 days. And then, we pick one, or three at the most, strategies that we’re going to implement into our area that’s the weakest, to make some changes in those.
So let’s get started. So what could we do to improve our leads? So if we have a look here. I’m gonna work down these logically, or in order, but what you would do is you would pick, where’s the area that is sucking the most. ‘Cause that’s gonna give you the biggest opportunity. So if we have a look at, what could we do to improve our leads or our deal flow. So this is per quarter. So this person, within 90 days, has got eight of their ideal leads at the 250k. So that’s three months, so that’s just under three a month. So what could we do to increase our deal flow or our number of leads? Well, we could define our USP better. Our unique selling proposition. Why someone would choose us over any of the other building companies out there. Next, our online marketing. How many leads are you actually getting in on a regular basis? Are you doing Facebook marketing? Do you have a funnel set up? Are you doing Google Adwords, driving people to a landing page?
Next, we could put our 1% referral scheme out there so that we’re actually getting a lot more targeted leads in. And our position, to position us as the go-to gurus within our chosen niche, whether that be renovations. And actually nailing down our niche as well is a good one. So if we do all that, we should be able to at least improve our leads to go from eight decent leads to 12. That’s just over one a month extra over those three months. Okay.
So if we do that, next area that we might work on is our conversion rate. So at the moment, we’re getting 1 out of 4 leads over the line that we price into action. So if we want to improve that to get 1 over 3, first we might map out our sales process, and if you haven’t done that already you want to follow that TPB professional builder seven step sales process. Next, get a killer information pack. This really is a game changer ’cause it lays out all the key things that people want to know from you before they’ll buy from you. Who are you, who’s your company, can I trust you, and how specifically can you help me? So if you’ve got those in play, then sales becomes easier when marketing does the heavy lifting and it’s helped answer all those questions.
Also next, what is your guarantee? So over and above the master builders, certified builders, or any other association’s guarantee, what is your guarantee? So you might guarantee, no yucky stuff on site. So no swearing, no loud radios, no dogs. You might guarantee we’ll leave your home more cleaner than what you left it with us. So, if you’re doing renos, that’s a big one. So our guys use drop sheets, etc. You might have phone scripts. So use phone scripts. A qualifying questionnaire, so you’re only dealing with those people who are really qualified, etc. You could also put in place an auto responder funnel. So this is gonna help to warm up all those people who are in your funnel who are 3, 6, 9, 12 months away from building. We’re gonna get them to grab your lead gen magnet first, off your website, it’s gonna position you as the experts. So it might be, “Top Nine Things You Need to Know Before Renovating Your Villa.”
Alright, so now once we’ve improved our sales process and we’ve gone from 25% to 33%, from one out of four to one out of three, that means that now instead of us doing two jobs during the quarter, we’re actually now able to do four jobs during the quarter. So we’re multiplying here, rather than getting an additive effect. So next area that we can work on, average dollar sale. So this is where we’re looking to use case studies, video testimonials, good strategic alliances with architects, make sure that you are fishing in the right ponds. And by that I mean you’re not competing on price via tenders, ’cause you can’t influence the outcome of the client. You’re not going through builders crack, etc. So, good strategic alliances with the right kind of architects. Video testimonials, again, very powerful here. And referral strategies work phenomenally well to help increase those average dollar sale strategies.
So if we can get that up just from 250k to 300k, means that we’re now going to have a turnover for the quarter. So we simply multiply these. Four times 300 means we’ve now gone from a turnover of 500k to 1.2 million. So extrapolate that out for the year, since there’s four quarters in a year, that means we’ve now gone from 2 million to a turnover of 4.8 million annualized. So small hinges swing big doors, and lots of small changes in multiple areas can make a massive difference to the top line and also the bottom line of your business.
Now, the next area to have a look at is a massive one in my point. It’s your gross profit margin percentage. So, key things that we can do here, we’ve actually got six key ways to improve your gross margin. So there’s three key ones going in. So those key ones are marketing. If you’ve got a flood of leads, then you don’t have to take a job at a low margin just to keep your guys busy. You can cherry pick the right kind of jobs, the right kind of person, the right kind of project, right area, et cetera. Next is positioning. So positioning yourself as the surgeon within your niche, so that’s educating people, drip feeding them case studies, why they should choose you, informative articles, positioning yourself as the expert. And after all, this is peoples biggest investment of their life, typically. So we want to show them we’ve got all the systems and processes, like your quality assurance system, your 275-point check, on site etc., to make sure that they’re gonna get exactly what they say you are going to deliver.
Next key thing in terms of gross margin on the way going in is pricing. Make sure that you’ve got all of the elements in terms of overhead recovery margin, your project management fees, everything that you need in P&G to hit your desired target. And as a minimum we recommend hitting 20%. Depending on the size of the job. But that’s a great guideline. Anything below 20%, it’s gonna be hard to make a decent profit to be able to pay all your overheads and hit your desired profit at the end of the day, for the risks that you take of being a business owner, shareholder, employing people, having our accounts at the merchant, etc. So three key things we can do going in. And the other one I would add to that is the channel that you’re going through. So if you can get jobs directly as opposed to labour only, or going via architects or via tenders or via Builderscrack, they’re all ones we don’t have as much impact. And are able to affect the client as much, as if you’re going direct via your direct response marketing, online marketing, 1% referral fee, etc.
So get good at marketing, and then it is still possible going in to get a 20% GP and have that eroded. Now that should be your target that you’re aiming for, at a minimum. But even if you hit that, we want to make sure that, especially on effects price contracts, we’re not having that eroded through materials, labour overruns, or subtrades. So specific things that you can do to make sure your subtrades are living up to their end of the bargain. And that you get everything signed off, have a contract in place, make sure you agree with terms of trade beforehand, what happens if they don’t perform, and also make sure that every 90 days you look at potentially getting your prices shopped to other subbies to see what they would charge to do a similar type of job.
And last but not least, make sure that you control your labour on site. Break it down by stage, incentivize your guys, control your work in progress in real actual times, have those meetings on site. So we’ve got six times gross profit margin strategies. I won’t detail them all out here, but if you have a look at the gross profit margin strategies in the training in the builder’s toolbox on the members website, you’ll see those key strategies there that you can do. And also have a look at the other 151 ways that we’ve done over the last couple of years. 151 ways that you can increase your margin per job. So we’ve now increased our GP to 20%, so we can have a look at our total gross profit. 2 mil at 15% was only 300k. But 4.8 mil at 20% means that we’re going to have a gross profit of 960,000. Considerably more.
Now the next key part, what’s this done? Well fixed cost to run a bigger business and to manage 4.8 mil worth of work and quite a few jobs during the year, so we’ve gone from eight jobs overall during the quarter to potentially 16 jobs, means that we might have some increase in overheads. So if we have to hire an office manager full time, we might get our project manager on board, we might have QSing that we’re outsourcing. We might be spending some more money on marketing overheads, etc, to make our business more professional. Means that our overheads might now have come up to, let’s do the addition for that. An extra 170k. So we’ve got 320k in total. And that means that now, our EBITDA, or earnings before interest tax depreciation and amortisation, or basically our net profit, means that we subtract those two. We’ve now gone from making 150k to making $640,000.
Now, this’ll massively increase the asset value of our business. If we don’t assume any stock assets, etc. We might have had an asset value of our business, if we had a multiple of one, of 150k here. The more we systemize our business, put the right process in place, we could go to a multiple of three. Means we’re gonna have asset value of our business of around $1.92 million. Plus stock, plus assets at book value. So. What have we done here? Well we’ve put a lot of systems in place. We’ve got a happier team. We’re able to incentivize our team on site to make sure that we’re improving our gross margin. We’ve got great deal flow, so we might have 6 to 12 months of work booked out in advance. We’ve got financial freedom, ’cause we don’t have to take a job at low margin, so we’re not beholden to anyone. And we’ve got happier guys, happier clients, we’re able to spend a lot more time and if you want to see some epic case studies on here, have a look at the success stories on the Professional Builder. We’ve got a lot of those that we’re drip feeding out at the moment.
So, more value in your business. Better systems for getting regular work in, processing it, making sure the guys are productive on site. Happier clients, happier team, and hopefully happier you, because you got a well systemized, professional building company that’s gonna give you more time and more money. So what to do from here? Well the action plan is, get your numbers out now. Use the sheet that we’ve got and the calculator available. Plan out which of these areas has the most opportunity that you’re gonna take action on in the next 90 days. And then start setting some targets. And then what we’re gonna do is just put three strategies into place over the next 90 days to improve the number that makes the most sense and has the biggest opportunity.
And it’s really critical that we know and show our numbers. So one that’s top of mind for us, two our teams share it, so for example, work in progress meetings, we’re gonna let them know the milestones versus the labour hours. So we had 150 hours for the framing, we’re halfway through the framing, we should be at 75 hours, but hey, we’re actually up to 92. What are we gonna do to pull back an extra 17 hours over the next four weeks? Otherwise no one’s getting their bonus.
So that’s it. Take these strategies. Fill out the sheets. Go into the builders toolbox on the membership site. Pick out which strategies are going to be most useful for your situation. And then get hold of the trainings, so they’re all on the member site. And start putting them into action. And then comment below in the members group. I look forward to seeing what your results are, and helping you take your building company to the next level. Right team, that’s it from me today. Cheers!