My rookie year…
Once upon a time, I quit my real job (restaurant manager – good salary, benefits and someone to cover for me when I wasn’t around) and went to work for my husband, Hot Rod, in his contracting company.
It was the dumbest decision I have ever made.  It was hell.  I left my steady paycheck behind and assumed financial responsibility for a sinking-fast company.  I was college educated.  I graduated Summa Cum Laude with a BS in Business Administration.
The BS really stood for my approach to business.  I didn’t know what I was doing.
I was the rookie bean counter.  And, I didn’t know my asset from my elbow.
I did NOT want to crunch numbers, look at spreadsheets or confront our financial situation.  I wanted so badly for a magical bean counter fairy to wave a wand and make millions of dollars appear in our checking account.
“Shouldn’t our accountant handle this?” I fumed.  “I don’t have time to figure this [...]

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Frank Blau
Contributing Author
Blau Plumbing
 
I don’t know if one of my students made a New Year’s resolution or not but the proof of what he’s accomplished since 2007 is apparent in the profit and loss statements shown on the attached excel sheet. It compares the last five years from a former student. Here’s what he wrote me:
“It has only been two years since my first Blau seminar, a quick 24 months. What a difference that time has made in my life and all those around me. I’ve put together a consolidated version of the last three profit & loss statements (’07 - ’09) since I attended your seminar. As you can see, I was in the “can” before we met, but wanted to stress to you and your followers how bad off we really were.”
Since then I’ve included two additional statements from Jan ’10 and ‘11. This company offers dramatic evidence of how quickly PHC service contractors can turn their life [...]

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You are sick and tired of being a slave to that disaster you call a business. The one that pays slave wages and lousy benefits to employees and little or nothing to yourself and your spouse. The business that is sustained only by the patience of your vendors, who don’t get paid for 90 days or more when times slow down. Finally, you are ready to make a change for the better. You purchase the Frank Blau “Business of Contracting Kit”- from ShuBee. You have become a numbers cruncher. For the first time in your life you’ve learned what it really costs to run a business, and what you and your employees are worth in the way of compensation. You make the decision to run a business as it should be run – in a way that takes care of you, your spouse, your employees and your customers the way they deserve. Continue Reading »

Frank Blau
Contributing Writer
Frank Blau Plumbing, Owner
My article in the April 27th eBuzz, “I’m Mad As Hell!”, has gotten as much reaction as any I’ve ever written. In it I vented my anger at all the people I deemed “slugs,” who are dragging the industry down.
“What’s a slug?” one of my industry friends asked me not long ago. For those who don’t know, a slug is a type of snail. Snails are slow and primitive, so I used the term to describe people in our industry who fit that description. Most people regard snails/slugs as loathsome creatures – except for French chefs, who call them escargot and prepare them smothered in butter.
The fact that some people in our industry didn’t know what a slug is leads me to believe that they may not be able to identify the PHC industry version either. So I have prepared a little quiz to test your powers of perception. Answers and scoring are at the [...]

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In most service businesses, 70% of a company’s costs of doing business will be consumed by only five expense categories. One of them is labor. This article will focus on arguably the number one expense you need to manage—Direct Labor. When you look at your profit and loss statement every month, I assume you have a minimum of two columns. One column shows you the actual cost in dollars; the other column presents the actual cost as it relates to net sales, as a percentage. Something like this— Continue Reading »

Last eBuzz, I pointed out some problems with the format of an actual profit-loss statement from a Midwestern service contractor. You may wish to re-read “Numbers Tell a Story” article to refresh your memory. This edition I’m going to take it a step further by reconstructing the format and plugging in some new numbers that make more sense. The line items highlighted in bold face on the chart are the ones we concern ourselves with. First, look what I have done with the revenue side. The numbers are higher because I factored in modest 9.62% increase in selling prices for this firm. This was an arbitrary percentage that I came up with to achieve a reduction in direct cost of sales from 44.5%, which was too high, in my opinion, to a more reasonable 37%. I believe that this firm could raise its selling prices and revenues by much more than 9.62%. However, for the purpose of this article, I wish to make the point that even a modest increase in price can reap great benefits. Continue Reading »

If you were driving 80 miles an hour, in the dark, with your lights off, heading towards a cliff, would you like someone to yell, “STOP?” OK. Stop! Do you produce financial reports – the balance sheet and income statement – every week? Do you analyze sales, costs, cash flow, and debt every week? If not, you may be heading for the cliff. STOP. And find out. This is the year. This is the day. From here on out…you are going to KNOW. Continue Reading »

The 2002 and 2003 profit and loss statements attached reflects an actual case for a Midwestern plumbing and drain cleaning firm. In 2002, the business was a partnership jointly owned by a plumber and a realtor. The realtor bought out his partner and, after attending one of my seminars, revamped the business in a way that resulted in revenues almost tripling. The 2003 financial statement was also much improved, though, as I will explain, it still falls short of the ideal. The most glaring problem with the 9-month statement for 2002 is in the Cost of Sales category near the top. All it shows is a single line item for Plumbing - $19,115, amounting to 8.7% of sales. I don’t remember what this was supposed to measure, probably materials. In any case, it is an inadequate breakdown. (I was told that this statement was prepared by a CPA, which goes to show how little many accountants know about our industry. As you see with the revised 2003 format, the Cost of Sales category was expanded to include several items that previously were tallied, mistakenly, under Operating Expenses. We see wages broken out for both plumbers and drain cleaners, as well as subcontracting costs, commissions, parts & materials, permits and payroll taxes. All of these are direct costs, or what we call overhead. Continue Reading »

The last couple of articles dealt with the importance of calculating dollar-per-hour overhead (DPHO) for your business. DPHO, however, is only one component of a costing and pricing system that results in profits. The rest requires a precise measurement of labor and material costs. Material is the easiest to compute. You know to the penny how much you pay for most job materials. One exception is consumables, which ought to be spread across all jobs as part of overhead, but this seldom amounts to much. Continue Reading »

Blau Plumbing recently introduced a newly designed job ticket that serves a number of purposes besides the routine recording of everyday transactions. It does so many things, in fact, that it will take me three articles to describe them all. Our job tickets contain three distinct parts, five pages altogether: 1. A form in triplicate (two office copies, one customer copy) 2. A separate proposal for work that arises unexpectedly. 3. A heavy paper stock back cover with a $5 off coupon, postage paid reply card and customer communication about the work we do. All of this will be covered in this three-part series. Continue Reading »