Reverse Engineer P&L
When a process is analysed to recreate it efficiently, it is known as Reverse Engineering.
Today I am going to show you how to apply this process to your electrical business profit and loss to increase your profit and success in the electrical industry. Are you ready for this Ultimate Electrical Business Finance Tip?
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Do you find the hardest thing in business (and in life) is to work out what you want? It can be because of having too many options and possibilities or because of our busy minds (Internet doesn’t help one to stay focused, either.) When we take all of this into consideration, we realise that Googling “How to write an Electrical Business Plan” more often than not doesn’t provide any tangible results. And you are right where you started.
When you finally work out what you want from your electrical business, the answers remain same -- more money and more time. Do you agree?
After you have worked out how much money you will need to reach your level of success, which will be your goal. It will be time to reverse engineer your profit and loss. You can use your past earnings or a guesstimate figure to begin with. The most important things is testing and measuring as you go!
And then there is the time aspect, too. Ideally, the goal is to earn enough to pay someone to do your job so you can free up your hours.
“When you start defining your Profit & Loss (P&L) from the end —
You redefine your life.”
You are acutely aware of the goals in front of you and accordingly, you will be able to create a plan, too.
I hope this explains what it means to Reverse Engineer P&L.
Now, let’s take a look at a few conditions to help you successfully implement this process.
Reverse Engineer P&L: Working out your conditions
Be prepared. A battle lays in front of you. You are going to strategise to work out the tiny little details of your electrical business plan.
Are you ready?
Okay, then the first step is to know your overheads. Do your absolute best and in-depth research about the all the expenses you have, work hours, insurance, rent, van payments, registration, and all the other operational costs applicable to your Electrical Business.
You need to walk into your electrical contracting business with open eyes.
Regardless of what money you earn, you must always consider how much profit is in the revenue you are making. You could make $1million but if you have $1million in expenses, you make $0. Don’t get caught up in doing as much work as possible without measuring how much profit you are making. You could be working for nothing.
The next consideration is the difference between cashflow and profit, which is:
“When you make an invoice — you record profit.
When you get paid — you have cash flow.”
And in electrical business, you can wait long periods to be paid so managing your cash flow is as important as making sure you are making a profit.
After taking all the above things into consideration -- let's begin!
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