• Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
  • ENGINEERS
  • RADIANT & HYDRONICS
  • INSIGHTS
  • MEDIA
  • RESOURCES
  • EMAGAZINE
  • SIGN UP!
cart
facebook instagram twitter linkedin youtube
  • CONTRACTORS
  • BATH & KITCHEN PRO
  • BUSINESS MANAGEMENT
  • HIGH EFFICIENCY HOMES
  • TECHNOLOGY
  • WATER TREATMENT
  • PMC COLUMNS
  • PMC COLUMNS
  • Dave Yates: Contractor’s Corner
  • John Siegenthaler: Hydronics Workshop
  • Kenny Chapman: The Blue Collar Coach
  • Matt Michel: Service Plumbing Pros
  • Scott Secor: Heating Perceptions
  • ENGINEERS
  • CONTINUING EDUCATION
  • DECARBONIZATION | ELECTRIFICATION
  • FIRE PROTECTION
  • GEOTHERMAL | SOLAR THERMAL
  • PIPING | PLUMBING | PVF
  • PME COLUMNS
  • PME COLUMNS
  • Christoph Lohr: Strategic Plumbing Insights
  • David Dexter: Plumbing Talking Points
  • James Dipping: Engineer Viewpoints
  • John Seigenthaler: Renewable Heating Design
  • Lowell Manalo: Plumbing Essentials
  • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
  • RADIANT COMFORT REPORT
  • THE GLITCH & THE FIX
  • INSIGHTS
  • CODES
  • GREEN PLUMBING & MECHANICAL
  • PROJECT PROFILES
  • COLUMNS
  • SPONSOR INSIGHTS
  • COLUMNS
  • Codes Corner
  • Natalie Forster: Editorial Opinion
  • Guest Editorial
  • MEDIA
  • PODCASTS
  • VIDEOS
  • WEBINARS
  • RESOURCES
  • INDUSTRY CALENDAR
  • DIRECTORIES
  • EBOOKS
  • PM BOOKSTORE
  • CE CENTER
  • MARKET RESEARCH
  • CLASSIFIEDS
  • EMAGAZINE
  • EMAGAZINE
  • ARCHIVE ISSUES
  • CONTACT
  • ADVERTISE
  • PME EMAGAZINE ARCHIVES
search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!
Columns

Winning Numbers

By Maurice Maio
June 1, 2000
Numbers can tell us a lot about ourselves. For example, your doctor will give you numbers that assess your health — blood pressure, heart rate, blood sugar, etc. In much the same way, we can also assess the health of our businesses — profit margins, net profits, overhead, assets, liability and so on. In fact, given enough data, I think you’d see a strong relationship between the numbers representing your personal health and those of your business!

I’ve noticed another strong relationship between your profit margins and the amount of money you take home from your business. Let’s examine the interaction between your prices and profits. I’m not about to suggest a blanket price increase as a simple way to increase your net profits. All of us are constrained by local marketplace pressures that put a limit on our prices. And some common services, such as drain stoppages in my market, have become so fiercely competitive that they are not likely targets for increases.

Big Effect: However, small increases can have a tremendous effect on your bottom line. You might guess that a 5 percent increase in what you charge for a $20 part would give you a corresponding 5 percent increase in profits. That seems to make sense. But let’s take a closer look. Let’s say you paid $12 for that part, which you sell for $20. That gives you an $8 gross margin. Increasing the price a mere 5 percent means raising the sale price to $21 — which certainly won’t put you out of business.

As a result, your gross margin goes from $8 to $9, which comes out to an increase of 12.5 percent. That translates into keeping $112.50 for every $100 you used to take home — simply for raising material prices by just 5 percent. See what I mean about the tremendous effect such small changes make? The same return could be realized from increases in your labor charges or other fees as well. I’m sure that at least some of the service and repair jobs you offer are worth examining for such relatively modest increases.

The effects of such a small change in your selling price is all the better, if you can also find ways to shave your costs. For example, let’s say you’ve found a way to reduce the price you pay for that $12 part by 5 percent, or $11.40. If you can then sell it for $21, your margin increases to $9.60 — giving you an increase of 20 percent over your former margin of $8.

It’s equally valuable to point out that small changes in your own costs — the kind you might easily persuade yourself to ignore — can also have a devastating effect on your bottom line. For example, have your parts prices increased recently? What about your overhead costs such as insurance, taxes or rents? Did you pass on any of these extras to your customers? I know, I know. There are limits to passing on added costs just as there are for added prices. But businesses that repeatedly absorb price and overhead increases face a major squeeze on their margins.

Here’s what I mean: Let’s say that the cost of the item you continue to sell for $20 has increased to $13 from $12. That means your margin has slipped to $7 from $8 — a 12.5 percent decrease. In other words, that means for every $100 you used to enjoy, the fruits of your labor now bring home $87.50!

Double Leverage: There’s a hidden benefit to boosting your margins, besides getting to keep more of the money that would otherwise go right through your hands. For every dollar you can add to your company’s profits, you may soon find that you can get a multiple of that dollar when you want to sell your business. Any business is valued by measuring profits first. Adding to your profits today could produce many times that a few years from now.

So you now have double leverage. As margins increase a little, profits soar. As profits climb, the worth of your business increases too.

But it wouldn’t be fair for me to suggest an analysis of your prices without giving you an edge in the marketplace to more than justify any increases. You’ve probably heard me say this before — customers want, and will pay for, service. No one price shops for poor quality service.

If you are competing on price alone today, you are missing the boat. You need respectable margins to maintain the best service available. If your techs are not professionally trained in every aspect of top quality customer service — how to greet the customer, analyze the job, sell additional services once they’re in the door — your business is not putting its best foot forward.

From your perspective as owner or manager, you need the most up-to-date training, too. Understanding your costs and techniques to cut costs are essential, whether on uniform expenses or truck operations or inventory controls — and dozens more opportunities to produce winning numbers in your business.

Share This Story

Looking for a reprint of this article?
From high-res PDFs to custom plaques, order your copy today!

Maurice Maio is the president of Maio Success Systems. Maio specializes in helping businesses with flat rate pricing, telephone answering techniques, Yellow Pages ads and tech training. More than 20,000 people have attended a Maio Success Seminar. For information on Maio's flat rate system, products, services, seminar schedule or a free catalog, call 800/344-6246, or visit his Web site at www.maiomarketing.com

Recommended Content

JOIN TODAY
to unlock your recommendations.

Already have an account? Sign In

  • Worker using the Milwaukee Tool SWITCH PACK drain cleaner

    Pipeline profits: Drain cleaning, pipe inspection create opportunities

    Drain cleaning and inspection services offer lucrative...
    Plumbing News
    By: Nicole Krawcke
  • Uponor employee, Arturo Moreno

    The reinvestment in American manufacturing and training

    Plumbing & Mechanical Chief Editor Nicole Krawcke and...
    Plumbing News
    By: Nicole Krawcke and Natalie Forster
  • March 2024 Women in Plumbing hero image of woman engineer overlayed by circle of hexagon shapes with numbers from 1 to 10

    Celebrating 10 Influential Women in the Plumbing Industry

    Celebrating Women's History Month and Women in...
    Plumbing News
    By: Nicole Krawcke
close

1 COMPLIMENTARY ARTICLE(S) LEFT

Loader

Already a Registered User? Sign in now.

Subscribe For Free!
  • eNewsletters
  • Online Registration
  • Subscription Customer Service
  • eMagazine
  • Manage My Preferences

IPEX celebrates grand opening of new Florida distribution center

IPEX celebrates grand opening of new Florida distribution center

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

Bell & Gossett Illustrates Path to Net-zero at AHR Expo

AI can boost efficiency and profitability for plumbing, HVAC contractors

AI can boost efficiency and profitability for plumbing, HVAC contractors

NIBCO Press Solutions

NIBCO Press Solutions

More Videos

Sponsored Content

Sponsored Content is a special paid section where industry companies provide high quality, objective, non-commercial content around topics of interest to the Plumbing & Mechanical audience. All Sponsored Content is supplied by the advertising company and any opinions expressed in this article are those of the author and not necessarily reflect the views of Plumbing & Mechanical or its parent company, BNP Media. Interested in participating in our Sponsored Content section? Contact your local rep!

close
  • J.J. Keller CMV vehicles on road
    Sponsored byJ. J. Keller & Associates, Inc.

    The dash cam game-changer for small business safety

Popular Stories

The interior of a government building.

President Trump signs executive order promoting skilled trades and apprenticeships

Underfloor heating installation with drain sewer hole in bathroom close up on water floor heating.

Using hydronics to leverage time-of-use electrical rates

Watts Nexa mobile image

Behind the Wall: Where smart plumbing gets smarter

PMCE Home-X April 29 Free Webinar: From Legacy to Leadership: Preparing Your Home Services Business for the Next Generation

Events

November 13, 2024

Future Proofing MEP: Navigating the 2026 High Efficiency Water Heating Standards

Join our deep dive into DOE’s new standards so you can future-proof your MEP practice.

EARN: 0.1 ASPE CEU; 1 AIA LU/HSW; 0.1 IACET CEU*; 1 PDH

View All Submit An Event

Poll

Will business be up or down in 2025?

Do you anticipate business in 2025 to be up or down in comparison to 2024?
View Results Poll Archive

Products

The Water Came To A Stop

The Water Came To A Stop

See More Products

Download the FREE Water Conservation, Quality & Safety eBook: Plumbing Trends Increasing Safe Water Availability

×

Keep your content unclogged with our newsletters!

Stay in the know on the latest plumbing & piping industry trends.

JOIN TODAY!
  • RESOURCES
    • Advertise
    • Contact Us
    • Directories
    • Store
    • Want More
    • Supply House Times
  • SIGN UP TODAY
    • Create Account
    • eMagazine
    • eNewsletter
    • Customer Service
    • Manage Preferences
  • SERVICES
    • Marketing Services
    • Reprints
    • Market Research
    • List Rental
    • Survey/Respondent Access
  • STAY CONNECTED
    • LinkedIn
    • Facebook
    • Instagram
    • YouTube
    • X (Twitter)
  • PRIVACY
    • PRIVACY POLICY
    • TERMS & CONDITIONS
    • DO NOT SELL MY PERSONAL INFORMATION
    • PRIVACY REQUEST
    • ACCESSIBILITY

Copyright ©2025. All Rights Reserved BNP Media.

Design, CMS, Hosting & Web Development :: ePublishing

search
cart
facebook instagram twitter linkedin youtube
  • Sign In
  • Create Account
  • Sign Out
  • My Account
  • NEWS
  • PRODUCTS
  • CONTRACTORS
    • BATH & KITCHEN PRO
    • BUSINESS MANAGEMENT
    • HIGH EFFICIENCY HOMES
    • TECHNOLOGY
    • WATER TREATMENT
    • PMC COLUMNS
      • Dave Yates: Contractor’s Corner
      • John Siegenthaler: Hydronics Workshop
      • Kenny Chapman: The Blue Collar Coach
      • Matt Michel: Service Plumbing Pros
      • Scott Secor: Heating Perceptions
  • ENGINEERS
    • CONTINUING EDUCATION
    • DECARBONIZATION | ELECTRIFICATION
    • FIRE PROTECTION
    • GEOTHERMAL | SOLAR THERMAL
    • PIPING | PLUMBING | PVF
    • PME COLUMNS
      • Christoph Lohr: Strategic Plumbing Insights
      • David Dexter: Plumbing Talking Points
      • James Dipping: Engineer Viewpoints
      • John Seigenthaler: Renewable Heating Design
      • Lowell Manalo: Plumbing Essentials
      • Misty Guard: Guard on Compliance
  • RADIANT & HYDRONICS
    • RADIANT COMFORT REPORT
    • THE GLITCH & THE FIX
  • INSIGHTS
    • CODES
    • GREEN PLUMBING & MECHANICAL
    • PROJECT PROFILES
    • COLUMNS
      • Codes Corner
      • Natalie Forster: Editorial Opinion
      • Guest Editorial
    • SPONSOR INSIGHTS
  • MEDIA
    • PODCASTS
    • VIDEOS
    • WEBINARS
  • RESOURCES
    • INDUSTRY CALENDAR
    • DIRECTORIES
    • EBOOKS
    • PM BOOKSTORE
    • CE CENTER
    • MARKET RESEARCH
    • CLASSIFIEDS
  • EMAGAZINE
    • EMAGAZINE
    • ARCHIVE ISSUES
    • CONTACT
    • ADVERTISE
    • PME EMAGAZINE ARCHIVES
  • SIGN UP!