How to make profit in a service business?

Well done! Profit is the whole point of business after all (if we weren't worried about profit, we could register as a charity and pay less tax 😂)

For us, profitability in the past was mostly guesswork - it was one of the big goals we wanted to hit, but when it came to pricing work it was just done by feel with no real structure, no plan, no consistency. This lead to unpredictable cash flow and profit was just whatever was left in the bank at the end of the week/month/year.

Our big turning point came earlier this year when we joined a business coaching program. It's been a real eye opener and has set us on a totally different path. The one big learning is probably that you can't rely on your accounting reports to drive your business forward. Anything your accountant tells you is history, it's already happened and you can't change it. Too much focus on that is like driving while looking in the rearview mirror - not a good thing if you want to make forward progress, and if you try going forward fast while doing that, you'll crash and burn. 

Backcosting is the most important part of it. Every single job, you need to know exactly how much profit you make, whether it's on % target, or what needs to be changed to make sure you hit those targets. This is where Jobber has been great, because we have accurate data from every single job so we can easily calculate this. The Job Profitability % has been a game changer, we lean on this hard and it's one of the things I look at most often - a quick check every single time a job is completed. 

On the bookkeeping side, having your Operating Expenses accurately categorised will give you a clear picture of what your Gross Profit % target needs to be. This changes as your business grows, so you need to keep an eye on this, at least monthly. Once a year isn't enough, by that stage it's too late to make any changes.

Digging into not Gross Profit $/hr will give you an even better insight beyond a simple GP% target - this is the real eye opener and allows you to accurately focus on doing more of your most profitable work. Labour Utilisation is a big part as well, the new Jobber reports have been great to easily get a Birds Eye view of this also.

There's a lot of different pieces to the puzzle, but it comes back to having good data, looking at it and using it well, so you can make good decisions quickly and often. 

A note on cutting costs - it's important not to have unnecessary costs, but more commonly people won't have enough costs! If you want to grow, you need to keep increasing your overheads to support your business... trying to cut costs keeps your business limited and dependant on the owners. It's scary, but when you dive into the numbers it makes sense. You need a good plan, but it takes a leap of faith to follow it and take action.