Book contents · Part 2, chapter 4 of 6
The Money Engine is a model of how the business makes money at the level of a single sale or job. High-volume businesses such as restaurants, shops and clinics build a Unit Engine: the profit on each cover, sale or appointment. Project-based businesses such as installers, contractors and agencies build a Job Engine: quoted against actual margin, job by job. It is built once, reviewed every quarter, and it is where an accountant adds the most.
- The question
- Where does our profit come from, and where does it leak?
- How often
- Built once, reviewed at every Quarter Day
- Two versions
- Unit Engine for high volume, Job Engine for projects
- Who owns it
- The owner with the accountant; job data from operations
A Job Engine for four jobs
Four jobs from the fictional installer, all quoted at a 30% margin. Prices and actual costs are illustrative; margins and losses are calculated.
| Job | Price | Quoted margin | Actual margin | Margin lost |
|---|---|---|---|---|
| Kitchen fit-out | €18,000 | 30% | 28.3% | €300 |
| Office electrical works | €9,500 | 30% | 16.0% | €1,330 |
| Villa maintenance contract | €6,000 | 30% | 35.0% | −€300 |
| Shop refurbishment | €24,000 | 30% | 17.9% | €2,900 |
| All four jobs | €57,500 | 30% | 22.6% | €4,230 |
Every job was quoted at 30%. Two of them made less than 18%. Across the four, €4,230 of margin disappeared between the quote and the finished job, and none of it would show up separately in the annual accounts. Once you can see it, you can fix the quoting, the scope control or the customer.
How do you build a Money Engine?
- Choose the unitA job, a cover, a sale, an appointment: whatever the business sells one at a time.
- Find the real direct costMaterials, subcontractors and labour hours at a true hourly cost, including the employer’s social security and the hours that can’t be charged.
- Allocate overheads fairlySo you know the true break-even per unit, not just the margin above materials.
- Compare quoted with actualFor a Job Engine, every job. For a Unit Engine, profit per unit by product, channel or customer.
- Add the payment termsA job paid in 90 days ties up cash that a job paid in 30 days does not. Same price, less valuable work.
- Turn findings into rules and dialsPricing rules, quoting checklists and Weekly Dials such as actual versus quoted hours.
- Review it every quarterCosts move. The engine is refreshed at every Quarter Day, and prices with it.
The rule, and the mistakes to avoid
- Costing labour at the wage rate only, without social security and non-chargeable time.
- Looking at averages, which hide the jobs and customers that lose money.
- Ignoring payment terms and the cash each job ties up.
- Building it once and never refreshing it as costs rise.
How the Money Engine connects to the rest of the framework
Fed by
- Quarter DayWhat did we learn, and what comes next?
Feeds into
- Weekly DialsAre we on track right now?
- Year MapWhere are we going this year, in numbers?
Which pains the Money Engine fixes
The Part 1 chapters where the Money Engine does much of the work:
- 4Not knowing where you stand until year end
- 5Rising costs, flat prices
- 6Cash flow that keeps surprising you
- 7Debtors that keep growing
- 8The bank says no
- 11Hitting a ceiling
Questions owners ask about the Money Engine
What is the Money Engine?
The Money Engine is a model of how the business makes money at the level of a single sale or job. High-volume businesses such as restaurants, shops and clinics build a Unit Engine: the profit on each cover, sale or appointment. Project-based businesses such as installers, contractors and agencies build a Job Engine: quoted against actual margin, job by job. It is built once, reviewed every quarter, and it is where an accountant adds the most.
What is the difference between a Unit Engine and a Job Engine?
A Unit Engine is for businesses that sell many similar units, such as meals, products or appointments, and shows the profit per unit. A Job Engine is for project-based businesses and compares the quoted margin with the actual margin on every job.
How do I know if a job really made money?
Compare the price with the actual cost of the job: materials, subcontractors and labour hours at a true hourly cost that includes social security and non-chargeable time, plus a fair share of overheads. If the actual margin is well below the quoted one, the job leaked money.
The Money Engine shows what to watch. The Weekly Table is where the team looks at it every week and decides what to do.
Chapter 5: Weekly Table →Want this built for your business?
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