Maximizing profit in a tight economy

Al Schwartz talks about ways to maximize profit for your plumbing business in a tight economy

I'm going to go out on a limb here and say that if you are in business and reading this publication, you are in it to make a profit. I've never met anyone in this industry (or in most others industries, truth be told) who was working at it for fun or some noble purpose other than the profit motive. After all we are capitalists. We take our money and invest it in a venture that, we sincerely hope, will provide profits and a "return" on our investment.

There are other benefits to the capitalistic model, not the least of which is providing livelihoods to your employees and their families. As well, the purchasing of materials, vehicles, maintenance on said vehicles, office space, furniture, computers and other consumables all flow from the single adventure we call business. In other words, at least today, business is what makes America tick.

This fact has not been lost on the various levels of our government. If you want to really get apoplexy, sit down and try to figure out what percentage of your profits go to various taxes. The answer is upwards of 60% of every dollar you make. That's right; roughly $.60 of every dollar you sweat to earn goes to paying a tax of one kind or another. Almost takes the fun out of being in business, doesn't it?

Get a handle on labor costs
So, when you consider how difficult it has become to make and hold on to a buck, you would naturally look into ways to maximize your profit picture. We have covered several different ways of making the most money you can, on each and every job you do, in past columns. We've talked about controlling overhead (always a good way to save money). We've covered things like vehicle maintenance, material ordering and control as well as a few other mechanisms that are designed to stop the bleeding of your profits. These methods and ideas work not only in this especially nasty economy, but as models of good business in any economy.

Whether you are a large company with many employees or a one man shop, callbacks are one of the largest drains on profitability you can have. When labor for a particular job is estimated, there is always a certain amount of guesswork involved. No matter how good the estimator is, there are variables within each and every project that make pinpoint accurate labor estimating a virtual impossibility. Still a good estimator can get pretty close to actual labor time. Throw in a small "fudge factor" and you can get a darned good picture of your labor expenses on any given job.

Do it right the first time
One thing that can rob you of a significant portion of your profits is callbacks. You can call it anything you like -- do-overs or screw ups -- it doesn't matter. Having to redo work which has already been done is obviously an exercise in flushing profit down the drain. Sometimes a callback cannot be helped, but frequent instances of having to revisit portions of a job cannot be tolerated.

Many years ago, during a housing boom in the Phoenix area, there was a company doing tract homes that ran several crews of men who did nothing but drive around with an air hammer and compressor breaking up slabs on new homes. Their job was to relocate misplaced drainage, waste and vent lines, as well as copper water lines that were positioned outside of walls, kinked or otherwise damaged by the guys who did the original installations. This was the worst instance of unnecessary waste of profit I've ever witnessed personally, but I'm quite sure some of you have other horror stories that would rival it.

The whole point is that rather than address the root cause of the problem, which was lack of skill and training on the part of his "plumbers," the contractor chose to fund and equip cleanup crews. The excuse at the time was that the contractor was doing so many houses that he needed to get the soils in place so to keep his cash flow going. Needless to say that contractor went out of business pretty quickly.

Addressing the problem
When you have recurring issues with work that have to be done more than once, the best thing to do is to isolate the foreman, crew or the man involved. If you are a service shop, evaluating your servicemen is a simple matter. Figure out why the work needed to be redone. It might be supervision. It might be the man or a whole crew. It won't take long to understand what you need to do to correct the problem. It will usually come down to either inattentiveness, lack of skill or simply sloppy work habits, all of which can be addressed and corrected in one way or another. Simply allowing the problem to continue by turning a blind eye to it is not an option. You are in business to earn a profit. Callbacks rob you of that profit potential and they are unnecessary in most cases.

The Brooklyn, N.Y.-born author is a retired third generation master plumber. He founded Sunflower Plumbing & Heating in Shirley, N.Y., in 1975 and A Professional Commercial Plumbing Inc. in Phoenix in 1980. He holds residential, commercial, industrial and solar plumbing licenses and is certified in welding, clean rooms, polypropylene gas fusion and medical gas piping. He can be reached at [email protected].