Variances are a major obstacle to achieving high profit margins. If you’re not controlling your variances, you’re not protecting your profits. Variances include any and all exceptions to your goals, objectives, plans, standards and procedures and involve every area of your business.
The most obvious variances deal with construction costs, and these alone can wipe out 100% of the profits on a project. However, there are many other types of variances that can slowly erode your profits. Some variances may seem of small consequence, but a lot of little variances can add up to a big problem and undermine your efforts to increase the profitability of your business.
If you want to increase your profits, controlling variances is a good place to start. Controlling variances requires cooperation across the organization and a method of tracking performance against the plan. You can’t eliminate variances if you don’t know they exist. Using management reports to track performance against the plan will expose the variances that are sabotaging your profits.
Determining the cause of a variance is a crucial step in identifying what actions are necessary to eliminate it. Not solving the root cause of a variance is like bailing water from a sinking boat with a paper cup rather than patching the hole.
The difference between surviving and thriving often comes down to variance control. If you think you can’t afford the time and effort it takes to control variances, the truth is, you can’t afford not to put in the time and effort. Your efforts to eliminate variances within your organization will be richly rewarded.
A builder with an average net profit of 5% and construction cost variances that average 3% can increase profitability by 40% by reducing construction cost variances by 2%. To achieve the 40% increase in profitability, the builder did not have to raise sales prices, reduce specifications, or renegotiate vendor pricing.
“The Profit Doctor” Will See You Now
Charles C. Shinn, Jr., PhD (aka “The Profit Doctor”) has developed an online workshop to help home builders eradicate variances to streamline their operations and improve profitability. The workshop offers participants a unique opportunity to receive guidance from an industry expert with a proven track record of helping home builders improve their management processes and reach higher levels of success.
The Variance Control Workshop
is scheduled for April 6, 2021, from 9:00 a.m. to 1:00 p.m. Mountain Time. Click here
for details on the program. We recommend you register early for this event, as space is limited. We limit the number of attendees to provide participants with personal attention and a highly-interactive learning experience.
For more information, contact Lisa Putnam at 303-972-7666 or firstname.lastname@example.org