How to Establish and Stay on Budget
Most contractors I run across confess “I never have as much money at the end of the year as I expect to.” Do you suffer the same fate?
Do you arrive at year end wondering where your money went to? If so, I’d bet you’d like to learn how to avoid that ugly outcome.
Pay attention here, I’m going to let you in on a little secret that will help you end those unpleasant year-end surprises. Lean in close. Don’t tell anyone about this. It’s so secretive that few contractors do it. Are you ready?
Use a budget
That’s it. That’s all it takes. Create a budget, track the variances, and take corrective action when necessary. Class dismissed.
Oh, you want to hear more? Okay. Keep reading to learn how to put a stop to those nasty year-end surprises.
Annual budgets allow you to stay on top of your financial progress as your year unfolds. They arm you with the ability to reel in expenses before they kill your bottom line. They force you to think through your business’ strategy and its resource allocations.
When you don’t have a budget to monitor, or don’t monitor the one you have, you are destined to arrive at year-end thinking “Rats. Where’d my money go?”
Contractors’ aversion to budgeting has always struck me as funny (not in the ha-ha sense). On the one hand, contractors tend to be obsessive about planning field work. They know that letting their field crews sort out what to do from day to day is a recipe for disaster. But on the other hand, they don’t apply that reasoning to their business. Lack of business planning leads to poor financial performance; it’s as simple as that.
You need a budget, it needs to reflect the reality of your market, you need to keep a close eye on its progress, and you need to take corrective action when it’s called for. Anything short of this will leave you with that “What happened?” feeling.
Look at the Market
Before diving into the how-to budget details, let’s make sure you understand the connections between your budget, your business plan, and your market.
Your budget is a financial representation of your business plan. Your business plan’s purpose is to take advantage of profitable opportunities in the market. Budgeting should not be attempted until your business plan has been developed.
Your business plan should be aligned to the size of your market, the prices your market will pay, and the cost of serving its needs. You can only make as much money as your market will support and your business plan will deliver. Budget accordingly.
Contractors often put the cart before the horse. They set sales, overhead, and net income goals, put them into a budget, and then try to craft a strategy to fulfill them. That sequence totally ignores the market.
It’s foolhardy to create the financial model and then try to craft a business plan that fits it when the business plan hasn’t been tuned to the market. First strategy; then budget; then meet the budget; then build a bulging bank account.
Your budget will be developed through five stages: preparation, rough draft, refinement, reality check, and rollout.
Stage 1 – Preparation
Unless you implement a new sales and marketing plan, you improve labor productivity, or you reduce overhead, your financial performance will be controlled by the market and the economy. If they grow, you will make more money. If they shrink, you will make less, or even lose, money.
In this industry, past performance is the best predictor of future performance – unless you force change. Build your budget on the foundation of your recent three year financial performance. To do that, gather together the balance sheets, income statements, and cash flow statements for those years.
Next, tap as many information sources as possible to gain an informed view of upcoming market changes. Visit with your banker. Visit with your insurance and bond agent. Buy construction forecast data from McGraw-Hill or a similar provider. Search the census bureaus’ website for reports on economic projections. Call the Federal Reserve and see what reports they have available. Call your local economic development councils.
Eventually, you will discover the experts’ consensus opinion. Even they can be completely blindsided by turns in the economy, but they are the most informed group to listen to.
Go over the information with your executive team. Reach consensus on your upcoming market opportunities.
Here are the Stage 1 steps.
Grab the last three sets of annual statements.
Gather up construction forecasts.
Discuss market opportunities.
Stage 2 – Rough draft
The purpose of the rough draft is to give you a reasonable starting point. Your rough draft will not consider changes to your business plan nor changes in the economy. To create the rough draft, study the income statements from the last three years and determine:
Your sales trends
Your direct cost trends
Your administrative overhead trends
Your sales and marketing expense trends
Your operations support trends
Your labor burden trends
Your average gross margin
Take your most recent income statement and adjust each line item for the trend (up or down) or jot down the three year average, whichever you feel is most appropriate.
Here are the Stage 2 steps.
Determine trends and averages for each income statement line item.
Decide whether the average or the trend is the most appropriate assumption.v
Mark-up last year’s income statement accordingly.
Stage 3 – Refinement
Now, adjust the numbers for changes in the market and changes in your business plan.
If you expect the market to shrink, assume both your sales volume and your margins will shrink. If you expect your market to grow, assume either your sales volume or your margin will grow. Do not assume both will grow (we’re not going to go into this but it usually holds true).
Now estimate the cost impact of new business strategies. For example, you may decide to expand sales by pursuing the office building market. In order to land the work, you will authorize a ,000.00 advertising campaign consisting of magazine advertisements, direct mail, and client entertainment. This spending would be on top of the advertising you do to generate your current work load. Your advertising budget needs to reflect the additional ,000 investment.
When thinking through your business plan, look at closely the cost impacts of:
Increased advertising to pursue new market
Expansion of sales staff
Purchase of new equipment
Adding office staff
Implementing or altering management information system
Employee training and development
Changing the bonus plan
Entering a new geographic territory complete with local office
Pay raises
Rising health care premiums
Another budget impact you need to account for is improved selling performance. Assume your sales team persuaded another 20% of your clients to hand you negotiated contracts. You budget would need to reflect the higher mark-ups associated with negotiated contracts.
You are ready to finalize your first draft. Adjust the trended or average numbers for each line item by the impacts of your business plan. Re-type the document so that it is easy to ready.
Here are the Stage 3 steps.
Verify your labor pool and operations support staff team can handle the projected work load.
Verify the targets for sales volume and direct cost markup are reasonable
Verify increases in marketing and sales expenses.
Update equipment expense and depreciation to accommodate new equipment needs.
Update sales volume goal.
Update direct cost margin goal.
Calculate expected work load (labor, material, equipment costs).
Revise and re-type your budget.
Stage 4 – Reality Check
One of the primary reasons contractors fail to hit their profit goals is because they are overly optimistic about their gross margins. The time has arrived for everyone to join a no-holds-barred discussion on operations and sales.
You need to challenge all assumptions made that the crews will perform better than they have in the past. No baseless, pie-in-the-sky claims are allowed. Unless, there is a reason to believe turnover has been greatly reduced, more efficient equipment has been purchased, or the operations management team will be able reduce downtime and rework, do not assume your labor will be more productive than in the past.
The other claim that you must question strongly is the ability of the sales and marketing team to generate better quality leads and better paying jobs. Sales and marketing personnel are highly optimistic individuals by nature. Take their promises of greater glory with a grain of salt. Believe it when you see it, not before.
In other words, don’t take their word on gross margins at face value. You need to analyze it segment by segment. Discuss the real mark-ups each segments produces. Pull out your job costing reports to see what the real mark-ups ended up being.
Ask them why they believe the leads will be better and why the margins will improve. Segment by segment, forecast total sales and margins. Pull them together and compare to your budgeted direct cost and gross profit.
Adjust your budget accordingly. Now, you’ve finalized your budget.
Credit Consolidations for Homeowners
It is quite difficult to find people with only a single debt. Most Americans are having multiple debts because they pay most of their needs with credit system such as multiple credit cards for the entire daily needs, student loans, medical bills, auto loans, mortgage and many others. If we are homeowners and we have quite an excellent credit, then we have more credit consolidation options than people who have no home.
For us who are homeowners with equity, then we can qualify our second mortgage. We are allowed to borrow money and use it to pay our debts. However, this method is quite a risky method because if we are unable to make a payment, then we have a risk on losing our home. The good thing about this method is the system is tax deductible. Another solution if we are homeowners is refinancing our mortgage when the interest rate is dropping. This method is known as cash-out refinance. Now what of we need other methods because they are too risky? Or what should we do if we don’t have a home?
We don’t have to worry because there are many other credit consolidation strategies we can use. We should go to the professional service. The expert will analyze our debt and financial condition, so they can suggest us the best credit consolidation solution. One of the experts we can trust is CreditConsolidationCare.com
Laguna Tools official webpage
Laguna Tools recently upgrade their official webpage to be able to serve their client better and to gain more new clients through the internet. Catherine Helshoj, the wife of the owner and is also helping the company progress is supporting the additional option that their updated site has to offer. This is in line with catching up the improvement that all forms of business is now having. They are now getting the benefits of having an online store. Their client can conveniently choose from all the different items that they already have and has the option of buying it online or ordering it from their store. They also have a number of video instructions that aims to show their client how certain equipment can be correctly handled and the kind of work it is able to provide.
Laguna Tools still continues to increase the number of their high quality equipment. They are now one of the most complete companies to offer woodworking tools and their name has been well known to the whole of United States. Torben the founder of the company is fully supported by his wife Catherine Helshoj to continue to follow his heart and his dreams of being able to provide the most complete high quality tools to the US. This need was develop soon after they transferred in America and he immediately discovered that the country lack woodworking equipments. He was able to find some but does not qualify to his standards.
Laguna Tools have equipment that is highly based on the safety features and additional functionality that is based on the European type of equipment. Catherine Helshoj followed his husband Torben when he decided to transfer to America. And she was not really aware of the fortune that is waiting them in the new country. With her husband talent and her support they are able to start a company that is now celebrating its 27 years of service. They continue to aim for being known internationally.
And with the help of their webpage they are able to reach other countries but they still have their focus on providing services to the United States. Their equipment are known for its heavy duty qualities and safety features that is very evident on European made equipment which is what Torben highly recommends. The company is still aiming to serve a wider audience and they are still trying to complete their line of equipment.
Corporate Travel Agents Help In Managing Corporate Business Travel
Traveling for your business does not necessarily means buying expensive ticket for your last minute bookings. With the help of corporate travel agents or the corporate travel agencies it is very easy to get affordable corporate business travel to domestic and international destinations.
The corporate business travel is managed by many of the corporate travel agents, who can help you search for cheap tickets for your air fare. These corporate travel agents can also help you find cheap hotel bookings also; that your corporate business travel is easily affordable by you. They work for special corporate travel agencies that deal in corporate travel packages and can make all kinds of arrangement for your business travel.
If you need to travel in a large group for a special event, then again the corporate travel agencies can come to your aid. The corporate travel agents can get you good discount on your corporate business travel bookings. The areas covered by the corporate business travel may include booking tickets for your flight journey, bus journey or your train journey. They can also get bulk booking for your corporate business travel group and can get you good discounts on the booking.
The corporate travel agents can also arrange for your transportation and can get you the best information regarding your booking. Many of the corporate travel agencies function online as well and this makes it convenient for people to learn about the different types of corporate business travel. You can contact their online corporate travel agents, who may provide you with the required information related to the package deals. Booking your business corporate travel through the corporate travel agents can save you a lot of money and help you cut down on the expenses.
If you need to contact corporate travel agents online, who may be able to assist you with your travel plan then you can visit corporatetravelagency.co.in. The travel portal has good corporate travel agents who can provide you with the best corporate packages and deals. They can design your corporate trip for you and thus you can leave the travel plans on them and look forward to a well managed and affordable business trip.
How Can a Short Sale Help Me?
A real estate short sale occurs when a property owner sells their property for less than the mortgage amount owed to their lender(s). On the surface, this may seem like only the borrower benefits from such a transaction. However, that couldn’t be further from the truth. Note: See our “Are You a Short Sale Candidate” to find out if you or someone you know are short sale candidates.
For discussion purposes we are going to assume a homeowner is a short sale candidate.
For the homeowner, a short sale makes it possible to sell their home for less than the total amount owed. The sale of the property releases the homeowner from their debts and obligations without having to file bankruptcy or endure foreclosure. The homeowner is able to save their credit, regain their dignity and their peace of mind. Lastly, the homeowner will be closer to rediscovering the American dream of homeownership because they are able to amicably resolve their lender(s)’ concerns.
For the lender(s), a short sale can be less costly than foreclosure and can provide an acceptable hedge against future price declines within the market. Also, for lenders that have become insolvent and need to liquidate assets, a short sale is a way to quickly raise capital when compared to the foreclosure option – a process that could take a year or more to accomplish. Lastly, for lender(s), a short sale means a guaranteed loss now as opposed to an uncertain loss in the future. This may be in many instantances a much larger loss.
For the investor buyer, a short sale offers them the opportunity to “Buy a property for as much as 40% or more below market value.” This discount means that they are able to make substantial profits.
For the home buyer, a short sale offers them the opportunity to buy a more affordable home. For some, this is the only way to experience the American dream and obtain homeownership, as the lower price relates to a lower and more affordable monthly mortgage payment.
For the Realtor or consultant, a short sale provides the opportunity to earn a fee or commission for helping a struggling homeowner. In many down markets short sales are the only viable option for continued real estate sales. During difficult economic times and recessions, one or two extra sales per month may be the difference between earning a living or looking for another job. Those extra sales each month can come from negotiating a short sale.
If you are a Property Owner and realize the benefit of negotiating a short sale for your property instead of facing foreclosure or bankruptcy, then we encourage you to Become a Property Owner Member today!
If you are a Realtor and realize the benefit of being able to negotiate short sales, sell discounted properties, and increase your ability to take future listings, then Become a Realtor Member today!
If you are an Investor and realize the benefit of having access to a step-by-step system that teaches you how to successfully negotiate and purchase properties, discounted up to 40% or more below market value, then Become an Investor Member today!
We offer dozens more free articles on our site as well as the Internet’s first step-by-step, “how to” guide that walks everyday people as well as seasoned professionals through successfully negotiating their very own real estate short sales – and at a price you can afford.
Visit http://www.StepByStepShortSale.com for additional information.
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