Understanding your job costs, gross profit, and profit and loss statements
You work so hard, you think you are doing everything right, and yet your profits just don’t seem to be where they should be. You have listened to others tell you that you are just too big, or too small. Someone tells you to hire more employees and someone else suggests that you fire everyone and do it all yourself. With all this contradictory advice you don’t know where to turn or who to listen to.
In order to increase profits you need to look at many aspects of your business. The solution for one business might not be the right course of action for another, and can in fact, create havoc for your company. That is why it can be dangerous to answer this question without studying the individual situation.
To properly determine the correct actions you must analyze your income and expenses and know where the income is coming from and where the money is going. That sounds simple, but it involves really understanding your job costs and gross profits. In addition to looking at the overall numbers, you need to find out which types of jobs are the most profitable and which ones are simply not worth doing.
There are a few different ways you can increase profits including increasing volume and decreasing costs; however you must do an analysis of your profit and loss statements to determine the best course of action for your unique situation. You also need to know when it would not be beneficial to increase volume.