www.precisionmetals.ca Call Us, for your Custom Metal Needs. 8081, 132nd St. Surrey B.C. 604.594.6001 Filling needs and producing premier quality products for the construction industry since 1975. • Manufacture to Your Specifications • Will Work with You and Your Customer to Find Solutions 8081, 132nd St. Surrey B.C. Filling needs and producing premier quality products for the construction industry since 1975. Filling needs and producing premier quality products for the construction industry since 1975. www.rcabc.org  l  33 FEATURE that gross profit to cover your overhead. You should do this on a monthly basis. Example: Overhead $12,000; Gross profit 25 per cent Overhead/gross profit = breakeven sales $12,000/0.25 = $48,000 in sales. If overhead drops to $10,000 then $10,000/.25 = $40,000 in sales. Or, if you have a sales target of say $36,000, you can calculate, then you can afford overhead of $9,000 ($36,000 @ 25 per cent). Don’t confuse gross profit with mark- up. Gross profit is a function of sales; mark-up is a function of direct cost. For a 25 per cent gross profit you need to mark-up cost by 33.3 per cent. If you feel you are going to get into a position where you can’t get enough product, you need to focus on your “A” customers. Drop the “D” customers, which are the small or high maintenance ones. That way you will be more likely to have a stronger customer base. Likewise, now is the time to consolidate your posi- tion with your key suppliers. Give them more of your business so that they will likely support you better when times get tough. Talk to them about what initia- tives they can help you with. Go for win/ win situations. Review your overhead to determine where you can cut back. Unfortunately, as a plumbing or HVAC contractor you will likely find that 50 per cent of your overhead is salaries and salary related. If you have to reduce office staff can you move anyone from overhead to direct cost? Also, look at your key techs and know who would be the first to go should sales drop off. You may need additional financing to survive the next few years. Whether you have to buy additional inventory or have to carry overhead that may put you in a loss situation, now is the time to talk to your financial institution and tell them what is happening. Explain what you are doing to mitigate the situation and ensure their support. The Business Development Bank of Canada could be a good choice for additional financing. They are more likely to be supportive of your situation and can help keep your financial institution onside. It has never been as important to be proactive in your business. Talk to your business associations and see what guid- ance they are offering, and don’t be afraid to discuss this with your competitors; like you, they want to succeed in this business. And most importantly, share your thoughts with your senior manage- ment team and get their feedback. Take a leadership role and protect your business, your employees and your “A” customers. Ronald Coleman, B.Comm. FCCA, CMC is a professional accountant, author, certified management consultant and professional speaker who specializes in working with trace and specialty contrac- tors. Based in Vancouver, B.C., Coleman has completed 40 Inter-Firm Financial Comparisons of groups of construction companies in both the United States and Canada – including two for RCABC. www.ronaldcoleman.ca or info@ronaldcoleman.ca.