By Karrie Jackson, CEO and Cofounder, Evermore Accounting & Coaching

I bought my first business when I was 24. I spent that first year convinced that the answer to every problem was more work. More jobs, more revenue, more hours. If the month was slow, book more. If money is tight, sell more.

It took me longer than I care to admit learning that being busy and profitable are two different things, and that they sometimes move in opposite directions.

In thirty years of sitting with business owners, I have watched this same pattern more times than any other. The owner points to the calendar and says it was the best month we ever had. Then we opened the books and it was one of the worst.

Here is why that happens.

You paid overtime to do work you priced at straight time

This is the most common one and the easiest to miss.

When your crew runs 55 hours instead of 40, those extra fifteen hours cost you time and a half. But you bid the job at your normal labor rate, because when you wrote the bid, you were not thinking about which week it would land in.

Stack four jobs into the same two weeks and your labor cost on all four goes up, while your revenue on all four stays exactly where you priced it. The busiest weeks are the ones where your labor cost per hour quietly climbs, and nobody notices until the payroll runs.

You subbed out work at a margin you would never accept

When you are slammed and a good customer needs something done, you will find someone to do it. That is the right instinct. Keeping a customer is worthwhile.

But subbed work usually carries a fraction of the margin of work your own crew performs, and in a busy month you are subbing at whatever the sub will take on short notice, which is never the good price.

I worked with a plumbing company that had a record August and a terrible one at the same time. Almost 40 percent of their August revenue was work they had passed to another shop at a markup of about 12 percent. The revenue looked wonderful. The profit was almost nothing.

You took jobs you would have turned down in March

Busy seasons make owners generous with their standards.

The awkward job across the county. The customer who negotiated hard. The scope that never quite got nailed down. In a slow month you would have looked at that and passed or at least priced it properly. In a busy month it goes on the schedule because the phone is ringing and it feels wrong to say no.

Those jobs are almost always the ones sitting at the bottom of the margin list when we sort them later.

You spent more time driving than working

Mobilization costs are real, and they do not show up as a line item anywhere.

When you are running six jobs across a wide area in the same week, your crews spend hours in the truck that nobody billed. Fuel goes up. Effective productive hours go down. And the more scattered the schedule, the worse it gets.

A landscaping client of mine cut his service area radius by fifteen miles, and his revenue dropped about eight percent. His profit went up. He was spending more on windshield time than the outer jobs were producing.

The cash felt great, which made everything harder to see

This is the part that fools people.

Busy months bring in deposits and progress payments. The bank balance goes up. And when the bank balance goes up, most owners stop asking hard questions, because the thing that usually prompts hard questions is money being tight.

But a deposit is not profit. It is money you are holding to buy materials with. Feeling flush in August on money that belongs to September's material order is how good months turn into bad falls.

What to do about it

None of this means turning down work. It means knowing which work you are turning down and why.

Three things I would ask you to do:

Look at margin by month, not revenue by month. If your best revenue month has your worst margin, that is a pattern, and it will repeat next year unless you change something.

Separate your own crew work from subbed work in your reporting. These are two different businesses with two different margins, and you should never look at them blended.

Set a floor and hold it in July the same way you would in February. Decide now what margin you will not go below. The whole point of deciding in advance is that the busy season is exactly when your judgment is worse.

The uncomfortable truth about growth

Most trades businesses I have worked with could cut ten to fifteen percent of their revenue, keep their best work, and make more money.

That is a hard sentence for an owner to hear, because revenue is the number we all use to keep score with ourselves. It is the number you say out loud at the chamber lunch. Nobody asks about your margin.

But you cannot spend revenue. You can only spend what is left.

If you have never looked at your months by profit instead of by volume, that is where I would start. It usually takes about an hour, and the conversation it opens tends to change how the next year gets scheduled.