SME construction consulting: the case of the lying numbers

Problem: the entrepreneur makes decisions about what to sell based on gut feelings, not on numbers.

Solution: analyse the real margins of each product or service by reclassifying data.

Result: discovering that the "difficult" product to sell is the one that makes the most money. And changing strategy.

"We sell mostly product A, it's the one that goes best"

A construction entrepreneur from Northern Italy called me for consultation. He has two main product categories. The sales team likes product A: it's easier to propose, customers understand it immediately, it closes quickly. Product B is more complex, requires more explanations, the sales cycle is longer.

The owner and his salesperson are convinced they need to push product A. They want to run marketing campaigns to sell more of it. They have already contacted an agency.

Before spending a single euro on advertising, I suggest we do an analysis. Let's look at the real numbers, not the feelings.

What the numbers said

We reclassified the balance sheets. Took each product, calculated the real costs (not just the material, but also the sales hours, management, post-sales) and pulled out the net margin.

The result surprised everyone.

Product B, the one everyone wanted to drop, had almost double the margin. Not only that: whoever bought product B then came back for other jobs. Product A was sold once and that was it.

In concrete numbers: on an average 50.000 € job, product A left gross 9000 € in the pocket. Product B, on a similar job, left 17.000 €. Almost double, on every single project.

If they had followed their gut feelings and invested in advertising for product A, they would have spent money to sell more of the product that made them less money.

A second case: the window and door specialist who did too many small jobs

A window and door specialist from Veneto called us with a different problem. Turnover was growing, but cash flow wasn't. He was working a lot, the calendar was full, yet at the end of the month there was nothing left.

We analysed the projects from the last 12 months and divided them into three bands: jobs under 5000 €, jobs between 5000 € and 20.000 €, and jobs over 20.000 €.

Small jobs represented 60% of the projects but only 15% of the turnover. And the net margin, once site surveys, quotes and travel were taken into account, was 6%. In practice, he was working for free.

Medium and large jobs had margins between 22% and 31%. But because the calendar was full of small interventions, he had no time to follow up on the big customers. He turned down 30.000 € jobs because "we can't manage it" and meanwhile was making six handle replacements a week.

Why it happens more often than you think

This is not an isolated case. In at least half of the consultations we do, we find a product or a type of work that the company neglects because "it's too complicated", but which is actually the one with the best margins.

The reasons are always the same.

The sales team pushes what is easy. It's human nature. If a product sells with less effort, the salesperson offers it first. He does not do it out of spite, he does it because no one has ever shown him the margins.

The owner thinks in terms of turnover, not margin. If product A generates more turnover, it seems to "sell better". But turnover does not tell you what is left in your pocket. A product that turns over half as much but makes double the margin makes you more profit.

Nobody has ever done the real math. Calculating true profitability takes time and method. All costs must be included, not just materials. Most companies do not do this and make decisions based on incomplete figures.

How to do the real math

You don't need expensive software. You need a sheet with these columns for each type of product or job.

The difference between revenue and the sum of all these costs is the true net margin. This is the number that matters.

Let's take an example using real numbers. A window installation job that brings in a revenue of 20.000 €. Material: 7000 €. Direct labour (3 days, 2 people): 3000 €. Sales hours (survey, quote, two meetings with customer): 800 €. Management and logistics: 400 €. After-sales (one adjustment callout): 300 €. Fixed cost quota: 2000 €.

Total costs: 13.500 €. Net margin: 6500 €, i.e. 32.5%. Now do the same calculation for every type of work you do. The surprises come when you compare the percentages.

BAU Gest

Calculate the margin per product with BAU Gest

BAU Gest automatically analyses the net margin of every type of job. You see straight away where you earn and where you are working almost for free.

See how it works

Swiss
Made

BAU Gest

Net margin24,2%

Active jobs8

Hours deviation+12%

How to alter the product mix without upending the business

You cannot halt the sale of product A overnight. You have customers demanding it, and a team conditioned to propose it. The transition must be methodical, month by month.

Month 1: measure. Work out the net margin for each type of job. Share the numbers with the sales team. Most salespeople change their approach on their own once they see the figures.

Month 2: prioritise quotes. When a request comes in, the salesperson presents the high-margin product first. If the customer insists on the other one, fine, but the default option is always the one that makes you more money.

Month 3: set a minimum threshold on small jobs. Set a minimum job value, or add a fixed callout charge. Serious customers understand this. The ones who only care about the lowest price walk away (and that is not a loss).

Month 4: targeted marketing. Now you know which product to push. Your campaigns, content and case studies focus on it. You stop spending money to attract customers who want a lot of work for very little money.

Months 5-6: check the results. Recalculate. If the product mix has shifted even 10% towards the high-margin product, you will see the difference at year-end. On a turnover of 1.000.000 €, shifting 10% of the mix from an 18% to a 34% margin means an extra 16.000 € at year-end. Without working a single extra hour.

The Principle of Least Resistance

In psychology they call it the "principle of least resistance": people naturally go for whatever is easier. The same thing happens in business. You sell the simplest product, chase the nicest customers, accept the quickest jobs.

The problem is that the easiest path is rarely the most profitable. If you want to earn more, you have to push the high-margin products even when they take more effort to sell.

This does not mean dropping low-margin products overnight. It means gradually shifting your focus. Spending more time, energy and marketing on the jobs that actually make you money.

What to do next

Take the list of your products or services. Classify each by real net margin, from highest to lowest. If you don't have the data to do this, that is the first problem to solve.

If you find you are investing energy in the wrong product, you have found the biggest opportunity: to earn more without increasing work. You just have to change what you sell.

If you don't know where to start with this analysis, book 30 minutes with us. Let's look at your numbers together and we'll tell you where the opportunities lie. No obligation, no costs.