Profit Through Discipline: Why Most Business Owners Leave Money on the Table
Small business owners struggle every day with a simple question that most can't answer:
"What's my actual profit on each job?"
I just reviewed a transcript of my coaching session with a
contractor, and it revealed a truth I've been hammering for decades
- most entrepreneurs can tell you their revenue down to the penny
but have only a foggy notion of their profitability.
This contractor was wrestling with job costing - the practice of tracking all expenses related to each individual job.
While Dave knew his first quarter total sales, he had no idea if he made 17%, 30%, or some other gross profit percentage on each job. He had no idea whether the gross profit he earned was enough to cover overhead and make a net profit.
This brings us to the thing that separates the successful business owner from the perpetually struggling one: ruthless measurement.
The contractor and I spent nearly 30 minutes of our call figuring out the gross profit of a single small job. We saw that the job brought in $31,650 in revenue with concrete costs of $9,500 and labor cost of $10,260. The result? A gross profit of $11,890 - about a 37.5% margin on that specific job. Not bad!
But here's where it gets interesting: The job took a week to do. Once we had the actual numbers, we realized this job - despite its healthy margin - still delivered less gross profit than the business needed to hit its weekly gross profit goal of $13,500. The $13,500 figure is the amount of gross profit needed each week to pay all the overhead expenses and make a target net profit.
Without this analysis, our concrete contractor would have happily collected his $31,650 check, paid his bills, and never realized he was slowly bleeding capital. Given how important it is to know if you are losing money or making money, why do so many business owners avoid this kind of analysis?
Three reasons:
It's tedious.
My contractor client complained repeatedly about the hassle of tracking everything - "...allocating loads of dirt, rebar in bulk to each job, it's too much stress... it'd be a full-time job dealing with all that stuff."It exposes unpleasant truths.
Many entrepreneurs prefer the comfort of ambiguity to the harsh reality that they're not making making money.It requires systems.
Effective job costing demands consistent processes that many small business owners don’t appreciate and haven't established.
The successful entrepreneur must overcome all three objections.
I was impressed that my client not only understood but also came up with a practical solution. Rather than trying to track every nail and foot of rebar through complex accounting software, he developed a simple spreadsheet approach. Dave could track his two biggest costs - labor and concrete - and use those to gauge profitability. Once he knew his final numbers on a job, he could compare them to his estimated numbers and learn to become better and better aat bidding. He could manage his pricing and work to do enough jobs at sufficient margins to make a profit.
Here's what separates ordinary business owners from extraordinary ones:
The ordinary business owner says, "That's too complicated. I don't have time."
The extraordinary business owner says, "I can't afford NOT to know these numbers. I have to know what to charge to make a profit, and I need to know if reality on the job equals the theory of the plan."
After solving his job costing challenge, my client made another revealing comment: "I think I'm going to quit doing quotes on all weekend. Instead, I'm going to figure out all this stuff on Sundays."
There's wisdom here. The most profitable business owners allocate dedicated time to work ON their business rather than IN it. They understand that an hour spent analyzing profitability often yields more bottom-line profit than an hour spent delivering services.
I summed up the day by congratulating my client: "Do you realize what you just did is management?"
Indeed. And management - real management based on numbers, not hunches - is what transforms struggling businesses into profitable ones.
If you're not tracking job profitability consistently and with precision, you're almost certainly leaving money on the table. Start today with learning your gross profit margins and how much you have to sell to hit your net profit goals. Your future wealthy self will thank you.
Martin Holland is a seasoned business coach and founder of Anneal Business Coaching. With over 45 years of experience and a background in owning seven businesses, Martin helps entrepreneurs build clarity, control, and profitability into their companies. He is the author of The Profit Problem: They say I make money... so why don’t I have any? and host of The Cashflow Contractor podcast.
This article is based on real coaching sessions and structured using digital tools to enhance clarity and accessibility.
Learn more at annealbc.com | Book: theprofitproblem.com | martin@annealbc.com