What will your market support?

Thanks AC.

Tony quit being a smarta%% in my thread. :smash:

Scott we've been well above the 25-30% profit margin doing residential with a small touch of resi. commercial. (including owners share) But like you said it's low volume. Im not saying someone cant wash 1000 houses a year in the right place after being established. Not here though. If it was possible... the time, money and effort it would take to get there could be better invested pursuing more profitable types of work. Not to mention one would still have to deal with 1000 homeowners per year.

Nick I like your comment comparing someone who is busy and lives in BFE and someone who isnt and lives in a large metro area. I am and have been in full agreement with a few posters above. I Dont want to hear someone cry to me because they live in a town with 5 million people and have tons of competition. That just means there is work there for the taking.
 
All the Corporations (Not Businesses) mentioned above have what we as "Small Business Owners" don't have...Brand Recognition. 100's of millions of dollars each year is spent on advertising..i.e Marketing to accomplish this.

So how as Small Business Owners do we promote our Brand Recognition? You've got to get "Visible", by whatever means necessary. This will also take time, but it's very important to find new and better ways of promoting your Company in your Market as much as you can, as often as you can.

Marketing Builds Sales, Sales Builds Your Company. The growth of your Company is only limited by the Sales of your Company.
 
Try selling "for sale by owner" car lots - or a service "cleaning air filters". Nobody had ever heard of those, but we made them work by sheer willpower.

Nick, you are right, but the information AC put out is good to know too. There's a lot more information also like income ranges (for the house washing guys) and how well the community as a whole has accepted innovative ideas (for example a Lingerie show/pizza joint might work well in Florida, but wouldn't do so good in Oklahoma.

I think guys just need to know if there is enough business out there to support what they want to do. I found this out with Chris Chappel and the air filter service. His market doesn't have a lot of large enough buildings for him to do what I'm doing here. Also you couldn't do what Nick or Ron is doing if you live in a town of 10k with the nearest towns 30 miles away. (at least not they way they do it.)
 
Scott Stone said:
25 to 30% profit? Man, would I ever be disappointed, especially in a low volume business like sole proprietor house washing.
Click to expand...

Scott,

a 25% profit is very good. I am not confusing owner benefit with profit though. If you take what an owner operator can take from this business from all sources it is not uncommon for an owner to see as much as 50 cents on the dollar. But pure profit after all expenses will be closer to 25%.

AC
 
I have some trivia for ACm who funded the PAPA johns pizza CO?

AC Lockyer said:
Papa Johns Pizza will not enter a market until there are already three thriving competitors in that market. The strategy is that if the competitors have been there successfully operating within and developing the market then all they really have to do is come into that market and offer superior product and service.

Lets say you have 10 competitors in any given market. Lets also say they are doing $150,000.00 each in that market. Your goal would be to enter that market and develop through your own sales $75,000.00 immediately. Then focus on garnishing through offering superior product and service 10% of each of your competitors business away from them. That would give your new company a first years sales of $225,000.00 and make you the biggest company in your market.

However even with that push you still wouldnt have market share. This is because even with those companys sales being lowered to $135,000.00 each by you entering the market their combined market share would be $1,350,000.00 and you added to that would make the total market $1,575,000.00. Your company would only garnish 15% of the overall market.

Now if you understand marketing and economics you know that having 15% of the market also means that you are probably getting mostly customers that would buy from you because they like you at any price. This is called preference purchasing. You are their preference and that usually has little to do with price. So now about pricing...

If the majority of you small 15% of the market share is buying you as a preference and not a commodity you should be able to adjust your prices to allow for a nice 25 to 30% profit margin without loosing any more than 2 to 3% of your market.Usually that kind of adjustment allows you to make the same $225,000.00 total gross while doing as much as 30% less work. Less work for more profits, most business professionals are interested in that!

Hope this helps Chris,

AC
Click to expand...
 
Streamlining your business will boost your net. While 25% may be good for higher volume businesses, I agree with Scott that's not to good for lower volume models.

You can find many ways to streamline your business by "Knowing Your Numbers". Whats going where, and how to control it better. There are many programs for this, but I'm taking some classes over the Winter to really learn how to do a better job at this.

We boosted our numbers 2 years ago by stopping "In Person Estimates" for Residential house washes, they are now sold only by phone. But this is something that I designed to work for our market. It's do-able in other markets but you have to know really know your area very well, how to sell and talk to people. It was a savings in the 20% range on fuel costs, not to mention labor, equipment wear and so on.
 
We run on about a 20% net margin. I am perfectly happy with that. Business is business and numbers are numbers. Stroke it how you want but small business (less than 5 mill gross) seeing net margins in the 10-20 percent range is a successful sustainable business. I actually plan for a slight decrease every year but make it our goal to increase our margin every year. That comes from spending smart and increasing efficiency. I would say over the next 5 years we will slip to about a 15% margin which I will be happy with because in five years we should be around 3 mill gross sales.

Chris I don't see two trucks in your area being a problem at all buddy. A word of advice - set up your systems and have your checks and balances in place long before you get there though. I wish I could take a whole quarter off just to work on internals. But we do it monthly at our meetings and make what we call in flight adjustments. The money is out there you just have to have discipline, tenacity and implementation!
 
Great move to doing the estimates by phone. That is how we do our residential pricing and have been for the last 12 years. It can work really well but I understand it can be scary for a smaller company. Personal contact can be elevated too highly. I wonder how many others do their estimates for homes, roofs, and residential flat work by phone? Conversely, with commercial work we take the time and cost to get eyes on the job. From my experience it seems there are a lot of companies that could profit from using phone estimates consistently.
 
DJ Carroll said:
We run on about a 20% net margin. I am perfectly happy with that. Business is business and numbers are numbers. Stroke it how you want but small business (less than 5 mill gross) seeing net margins in the 10-20 percent range is a successful sustainable business. I actually plan for a slight decrease every year but make it our goal to increase our margin every year. That comes from spending smart and increasing efficiency. I would say over the next 5 years we will slip to about a 15% margin which I will be happy with because in five years we should be around 3 mill gross sales.

Chris I don't see two trucks in your area being a problem at all buddy. A word of advice - set up your systems and have your checks and balances in place long before you get there though. I wish I could take a whole quarter off just to work on internals. But we do it monthly at our meetings and make what we call in flight adjustments. The money is out there you just have to have discipline, tenacity and implementation!
Click to expand...


So in 5 yrs you will be making $250,000 a month? Great Goal Scrappy.
 
DJ Carroll said:
We run on about a 20% net margin. I am perfectly happy with that. Business is business and numbers are numbers. Stroke it how you want but small business (less than 5 mill gross) seeing net margins in the 10-20 percent range is a successful sustainable business. I actually plan for a slight decrease every year but make it our goal to increase our margin every year. That comes from spending smart and increasing efficiency. I would say over the next 5 years we will slip to about a 15% margin which I will be happy with because in five years we should be around 3 mill gross sales.

Chris I don't see two trucks in your area being a problem at all buddy. A word of advice - set up your systems and have your checks and balances in place long before you get there though. I wish I could take a whole quarter off just to work on internals. But we do it monthly at our meetings and make what we call in flight adjustments. The money is out there you just have to have discipline, tenacity and implementation!
Click to expand...

Great goals Dj , let's here it. I want to know the one thing that has changed all this for you. I realize operational wise it's many. I'm talking motivational, was it chuck?
 
Jared said:
Great move to doing the estimates by phone. That is how we do our residential pricing and have been for the last 12 years. It can work really well but I understand it can be scary for a smaller company. Personal contact can be elevated too highly. I wonder how many others do their estimates for homes, roofs, and residential flat work by phone? Conversely, with commercial work we take the time and cost to get eyes on the job. From my experience it seems there are a lot of companies that could profit from using phone estimates consistently.
Click to expand...

I definitely think your taking residential for the most part. Commercial sales you can sell by phone and I do on a regular basis. The larger repeat business is personal. You will never get those over the phone.
 
DJ Carroll said:
We run on about a 20% net margin. I am perfectly happy with that. Business is business and numbers are numbers. Stroke it how you want but small business (less than 5 mill gross) seeing net margins in the 10-20 percent range is a successful sustainable business. I actually plan for a slight decrease every year but make it our goal to increase our margin every year. That comes from spending smart and increasing efficiency. I would say over the next 5 years we will slip to about a 15% margin which I will be happy with because in five years we should be around 3 mill gross sales.

Chris I don't see two trucks in your area being a problem at all buddy. A word of advice - set up your systems and have your checks and balances in place long before you get there though. I wish I could take a whole quarter off just to work on internals. But we do it monthly at our meetings and make what we call in flight adjustments. The money is out there you just have to have discipline, tenacity and implementation!
Click to expand...

I hear you on the systems. We made a good start this year with them this year but have a long ways to go. RIght now sales and generating work is priority and everything else comes right behind that.
 
apple said:
For you commercial guys.

First of all I know each area and part of the country is different. Is there an average or a rule of thumb to determine how much a population will support?

I am in the midst of focusing our business plan and haven't had the luxury of asking myself this question in the past. Basically it has always been this area is the hand we were dealt, so we'll take what we can get.

I would like to think that our area the (Little Rock MSA 699K) will support a solid 2 truck business, but I do not know because Ive yet to do it!
Click to expand...

A year later I have a better idea.
 
apple said:
Oh, I mean I have a better idea of what our market will support.
Click to expand...

I know....what is it? LOL
2 trucks or more?

How did you make out with the Memphis deal BTW....think I know the answer but wanted to check.
 
You must log in or register to reply here.
Back
Top