Selling With Heart Still Requires Profit

I recently sat down at a coffee shop to have a serious conversation with a residential contractor. This contractor was struggling financially. He had plenty of work going and his sales funnel was packed. After a little bit of conversation I realized that his sales formula was incorrect. He enjoyed the art of selling but never took into account markup is different than profit. 

He would take his cost to handle the job and add 10%. The 10% he figured was for him. After taking some time over coffee and explaining to him you  must include your money in the job, along with your profit, then mark everything up.

The light bulb that went off that day was priceless.

Further, he was not job costing. Didn't have a handle on receivables. A hot mess he was.

I asked him if he ever read the book by Michael stone, Mark Up and  Profit? Michael did a great job in the book explaining profit and markup.  I gave him some quick pointers on how to get out of the situation and start estimating accurately:

1. Don't accept another job without at profit at a minimum. Customers will give you work all day long and     not care one bit if you're making money.

2. You will raise your prices. Don't sell yourself short.

3. You will have to start tracking your jobs to make sure your marking up appropriately. Simple formula        for contractors:

           Sales-(Overhead + Profit) = Job Cost

           Sales/Job Costs=Markup

Before he sold anything after that point I got a couple calls to make sure for estimating accuracy. 

Do you have similar situation where you hadn't a clue you were estimating incorrectly? The jobs were there but, no money once done?

Give me your comments below.