How To Rocket Profits – the Reason Behind the Moon Shot and How It Applies to Your Business
By: Ruth King
If you are like me, you don’t want your business to “crash and burn” like the early rocket experiments. Scientists eventually got it right. They learned from their mistakes and now rockets quickly get to their destinations…most of the time. If they are destroyed, scientists figure out what happened and make sure that it doesn’t happen again. The same is true for your profits. Analyze them and determine what happened and learn from those mistakes so you don’t do them again.
The Rocket Profits first step answers: “Where do you want to go?” and the Corollary, “Why?”
For example, John F. Kennedy, in his speech to congress on May 25, 1961, asked for funding for the first moon shot. He proposed that the US “should commit itself to landing a man on the moon and returning him safely to earth by the end of the decade.” It was an out-of-the box, almost science fiction goal – microprocessors had not been invented yet.
Now the Corollary, Why?
On September 12, 1962, John F. Kennedy followed up his Congressional Speech with a speech in Houston. He said, “We choose to go to the moon. We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win, and the others, too.
Now the why, behind the why: The United States was in the cold war with the Russians and he wanted to rally the country around an audacious goal, the “Moon Shot,” which, today, has come to mean any goal that is 10X rather than 10%.
How does this relate to your businesses? Answer the questions:
- Where do you want to take your business? Why?
- What can you 10X? Can you exponentially increase the number of maintenance customers each year? Can you 10X the number of customers you profitably serve?
Here are eight questions to answer to get ready for your moonshot:
- Productivity – For every dollar you take in the door, how much do you spend on payroll and payroll taxes? This ratio includes all payroll – field, office, and owners. Don’t include any benefits in this calculation. Payroll taxes are FICA, Medicare, and unemployment. This percentage can be departmentalized and it should be under 40%. For new construction this ratio should be under 20%. The lower the better.
- Net profit per unit or hour – For each revenue producing unit or billable hour how much profit do you generate? Then take your net operating profit and divide it by the number of units or billable hours. This is your 2024 net profit per unit or hour. If you don’t like the number, your first rocket goal is to increase it to a number you are comfortable with.
- Overhead cost per hour – for each unit or billable hour, how much overhead cost is there? To determine this number, take your department or company overhead and divide by billable, or revenue producing hours that you calculated for net profit per hour.
- What is your average revenue pre job/project/or service call?
- What is your recurring revenue plan enrollment percentage? For every opportunity you have to talk to a customer about your recurring revenue program, how many enroll?
- What is your recurring revenue plan renewal rate?
- What is your sales closing ratio?
- Job cost a minimum of 20 projects or products sold chosen at random. What was the net profit per unit or billable hour for each?
Choose your moonshot by answering these questions. Make sure your employees are on board with the goals. Tell them “what’s in it for them” so they help you achieve the goals.
Ruth King is known globally as the “Profitability Master,” and is a a thought leader in entrepreneurship and business. Her books have been recognized as among the greatest in numerous industries. Learn more about all her business activities here.
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