Free consult & free copy of book

E-Myth – “Why most small businesses don’t work & what to do about it”

Contact Us


Most 5 star CPA Google reviews in Canada

Read Reviews

Chartered Professional Accountants E Myth

1 Fixed Monthly Fee - Planning | Accounting | Taxes | Consulting

Helping Canadian businesses beat the odds!

Estimates & Proposals Are Not On Financial Statements | Edmonton Accountant

The number of estimates or proposals that go walk to the door. These are the number of bullets in the chamber. Then number the shots that you have in order to accomplish that goal of generating enough revenue.

Yeah, I can see why cause it’s mad. Hi,

thanks for joining us for another episode of ask [inaudible] Burl CPA. Today we are talking about estimates and proposals are not on financial statements. Edmonton Accountant have Trevor here with me again. Hi there chevre. You’re looking forward to the business and conference the bootcamp. It’s coming up on May 4th here. Yeah, very excited for that. It’s going to be great. Um, got a lot of great speakers who are coming and we are looking at possibly a packed house. Yeah, it’s a really exciting get there early. Yeah, for sure. Edmonton Accountant, the quote that we have here today, you know, we’re talking about essence proposals not being on your financial statements to Jim Collins quote, author of six business books, um, including one of my favorites, good degree. And it says the good to great companies did not focus principally on what to do to become great. They focus equally on what not to do and what to stop doing entirely.

Um, the statistic is, you know, Industry Canada statistic, you know, 50% of y’all with Canadian business go out of business, uh, within the first five years and 42% of these businesses go out of business because they fail to attract enough customers. Yeah. Edmonton Accountant, and you know, the story that we have here are business owners. They have low revenue, uh, but they’re not tracking one of the most important components to generating revenue. So, Trevor, what are the questions that these business owners should be asking? What are KPIs and do they normally show up on financial statements? So KPIs are the acronym for key performance indicator. And normally KPIs are, is the information that you should be counting the numbers that you should know about your business that do not appear on the financial statements. You know, I, I view the, the financial statement ratio analysis. Anything that you could do there is part of the racial analysis, but the key performance indicators are numbers that are hard numbers.

They’re black and white, trackable, okay. Uh, numbers that you can count a and you should be counting, but they don’t appear on the financial statements. Okay. So why is the number of estimates or proposals you give important? So I mean, we talked about, you know, the most common reason for businesses going out of business is not being able to attract enough customers, but the number of estimates or proposals that go up to the door, these are the number of bullets in the chamber. Then number of the shots that you have in order to accomplish that goal of generating enough revenue. So this will tell you, you know, is it we’re not getting enough shots or no one likes the proposals to begin with. Edmonton Accountant, these are some of the numbers that we need to track. We need to know, you know, it can help us break down if we’re having a revenue problem.

Is it that we know we’re not getting enough at bats or people don’t like, you know, what’s being put in front of them. Right. So is the value of estimates or proposals you give important? Yeah. So it, uh, not just the number of estimates that are going out the door, but are these really small proposals going out the door or the big monster proposals going on through the door. Sometimes, you know, they can have different sales cycles to this. Smaller proposals can turn over rather quickly in most businesses where if it’s a big proposal and usually there’s more decision makers involved in more moving parts involved, they can take a little longer and that, that sort of sales cycle. Edmonton Accountant, and it can also just tell us what’s the potential work that, you know, we’re missing out on if, uh, you know, we’re not acquiring some of these contracts.

I did, we did. We lose out on $1,000 contracts and we lose out on 1,000 thousand dollars contracts. Edmonton Accountant, you know, these are the, so it’s the number of estimates going out the door and the, the value of these estimates going out to the door is equally important and to determining, you know, um, revenue and our potential for revenue. Okay. So do the number of value estimates and proposals show on financial statements. They won’t be anywhere. So if you’re looking at your financial statements, it’s never going to show how many estimates or proposals we gave or what the value of the estimates and proposals we gave. The only thing that’s going to appear is the revenue, the amount of the completed contracts that you actually did a, so it was kind of, you know, uh, more backwards looking at it. It’s what we call what I would refer to as a trailing indicator, whereas the number of estimates going out the door and the value of these estimates is more of a leading indicator, what you can expect in the future.

Okay. So is it more effective to present an estimate or proposal in writing? 100% is way more effective to present and writing. We’re taught from a very early age to believe what’s written, not what people say. Um, you know, it regardless of, you know, what someone is saying is the, the truth or uh, you know, complete garbage. We’re just taught to believe what’s put down in writing. Uh, so a, you’re, you’re, you’re more likely to be taken seriously if the proposal is in writing. People are just, you know, it, it’s ingrained into our psyche to believe what’s written now. Um, be, it’s, it’s, it’s a little more easy to walk someone through a written document. You know, what’s going to help you keep your thoughts organized if you have to present it to the potential purchasers as well. That makes sense. So, um, we’ll clients that appeared hesitant often accept a written proposal later on.

Yeah. So, you know, I, I’ve learned that, um, you, you to engage clients in meetings and you give them a proposal or an estimate and they appear hesitant, you know, they’re, they’re good, they’re a good fit. Um, you know, they, they’re, they seem like a good client. Edmonton Accountant, but they just appear really hesitant. So people are really gung Ho and they can’t wait to sign the paper because of that. You’re just going to solve the problem that they have. Um, but you know, some people there, they’re not, but if you give them that written proposal, they’ll accept it later on. They just wanted to think about it and they want to analyze it on their own terms. But if it’s not put down in writing, they’ll never going to have the opportunity to do so. Right. So how can you use digital signature programs to make the process easier?

Yeah, so you know, it it, you, if you give a proposal to a client and that they don’t want to accept it there, you know what, you want to make it as easy as possible for them. So rather than, you know what I’m saying, I’m going to call you later, just actually send it through digital signature program. They don’t have to print it out and sign it and scan it and send it back. They can just do it. It’s one and done. You can track it. They know exactly what’s expected to proceed. Uh, it just makes the whole process easier and quicker. Edmonton Accountant, and the, you want to make it as easy as possible for your clients to do business with you. So use the digital signature programs that are out there. You know, Adobe document side is the one that we use. There’s a lot of other good ones, but you know, if you’re giving any sort of written proposal, uh, and there’s, uh, there’s an opportunity for the client to accept that at a later time you should be using a digital signature program.

So now should you be booking more than 50% of your estimates are proposals. So generally if you are booking more than 50%, I get, I get business owners, they come in all the time and I said, Josh, I’m booking 80% of my contracts and they’re generally a very small contractor who’s doing this and they’re very proud of this fact. And then I have to break the news to them that said, you were only booking more than 50% because you were half the price of the industry rate and the minute you started hiring people to do this work, you’re going to be losing your shirt at this price if you’re not losing your shirt already, which is yourself doing the work. Um, so in most businesses, if you were booking more than 50% of your proposals, unless you’re in the dream business and the dream industry where there’s just a sheer shortage and there’s no one else who could do that work, if you are booking more than 50%, you’re probably not charging enough and it’s not going to be economically viable, the longterm.

Gotcha. So how will the rule of three normally work for leads, estimates and sales? So it’s a good way and this rule will hold up against a lot of different industries. You know, we’d done, you know, Edmonton Accountant, medical industries where, where they’re giving a high level dental treatments or if it’s a plumber, uh, giving an estimate. So the, the rule of three is if you have, you know, three leads that come through the door, uh, you know, you’re going to, from those three leads, you’re going to get one estimate. Okay, now you’re not going to book everyone estimate. So you’re going to need more than three leads to get one job. So let’s take it from nine and you have nine leads come to the door. Those nine leas relate to three estimates, you know, actual proposals where the person showed up and they didn’t cancel.

And you’ve got to walk through, uh, you know, what services you’re going to provide. And then from those three estimates, proposals you’re going to get one job. So it starts to anal to translate through and to nine leads, three estimates and proposals one job. So you need to phone to re nine times to get the one job. Yeah, that makes sense. So can you track estimates in modern accounting software like quickbooks online? Yeah. So a lot of the modern accounting software, they’re going to have the ability to actually provide that, uh, estimate, uh, for the, for the client. And it provides just a, you know, a nice organized professional looking templates. I’ll also, it’s trackable. It was very easy to pull the data and the analytics from that. So even though it does, it’s not going to show up on your profit and loss sheet or your balance statement.

Um, those estimates are in your accounting program and you can run the analytics on that. You know, how many estimates would be given this time period, how many estimates did we give on that time period? And that’s a nice professional looking document that you’re probably paying for the software already. It’s also web based. Um, so it makes it very easy to send the estimate or proposal to the client to um, you know, it can be one of the advantages as well. Nice. So does preparing the estimate in quickbooks make preparing the invoice easier? It does, yeah. So a lot of the other way quickbooks online does it is you can actually take that estimate and use that estimate to then populate the invoice. So rather than write out the estimate and then again right out the invoice, you know what we can imagine a scenario where we assemble an estimate based on dropdown items in our quickbooks accounting software.

So we’ve assembled the estimate way quicker than if we had to write it out the first time. We’ve got a nice template with the company name and the address and the GST number and everything we need on it. And then we use that to automatically populate the invoice. Would everything they need. And the, the, you know, where to send the check here, the payment to, um, you know, the payment terms, the, the, the amounts of the subtotals of, so it makes assembling the invoice that much easier as well. Yeah. So it really takes a multistep process, puts it into one place, makes it simple for you to provide the estimate, create the invoice, and um, get everything done in a quick, easy, efficient manner. And that saves time for a business owner, especially if you’re a sole proprietor. Um, I think that is great business sense in order to simplify your life 100%. Yeah. So I think that’s what we have here today. We’ve already asked him at some proposals. Uh, thanks so much for tuning in. As always, if you have any comments, we love to see them below, uh, so we can address them as well as a, you know, use them for tops of the future videos. Edmonton Accountant, and as always, please hit the subscribe button so we continue to deliver you information on how to beat the odds at business. Thanks very much.