Amelia : We’re back with Day 2 of our Winning Week Challenge. I’m Amelia.
Duayne : And I’m Duayne.
How did you go with your deep breathing exercise? Did it feel weird? Did you enjoy it? Did it change how you felt? Keep at it - anything new can feel strange at first, but if you’re like me, you’ll find that once you feel the ongoing benefits of it, you’ll make it a habit in your everyday life.
Amelia : Today, we’re switching gears, and we’re going to dive into something related to a couple of our 6Ps: Projects, and Professional.
If you’re like most builders we know, you started your own business because you wanted some independence, and freedom. Some autonomy to work the way you want on the projects you want to do. And also to make money, to make good money, so you can support the kind of lifestyle you want to lead as well.
Duayne : However, what we see for a lot of builders is in fact the opposite. They’re tied to their jobs. Profitability is scarce or non-existent. In fact, many can be trading insolvent without even realising it, and going out the back door faster than they realise.
Amelia : Unfortunately when this happens for builders, they’re not running their business effectively anymore. They’ve actually just bought themselves a badly paid job, with a huge amount of risk attached to it.
Duayne : In the past, it’s been like this for me. I can remember being at a point in my business where I didn’t want to answer the phone because it was just another person or business asking me for money, I didn't have to pay a bill, I didn’t know how I was going to cover. I couldn’t take time off because I needed to continue to make more money. It’s a really stressful way to exist.
One of the great things about a building business is that it is FULL of data. There is all sorts of data you can record in your projects and business to give you information on how things are going, and what you need to pay attention to, to ensure you’re being profitable overall.
Amelia : Many builders can be scared of this data, or not know how to collect it. If you felt you weren’t good at school, or aren’t good at maths, you can avoid making the most of what this great data can tell you. Numbers don’t lie - that’s the beauty of them. And so figuring out what data to collect and capture, and then having a process where you review on a regular basis, can make a massive difference in your business.
Duayne : And that’s why we’re calling Day 2 “Tuesday Money-Maker”. Because this is the day you’ll know if you’re making money, and regularly reviewing things will mean you can act and change things before it all becomes too much of a problem.
Remember: in any business, CASH IS KING. And this is especially the case in a building business. Construction businesses make up 20 - 25% of insolvencies each year in Australia. It’s leaving so many in trouble:
- The builders with family run businesses and their own homes on the line
- The suppliers and subcontractors who don’t get paid
- The homeowners who end up with half-finished homes.
Cashflow is super important in avoiding this.
Amelia : One way to assess how you’re doing in this area is to review your actuals against your allowances. To do this well, your proposals, or quotes for your projects, will need to be detailed. This is a good practice to get into when you’re pricing your jobs, because it will help you ensure you’ve allowed for the work accurately, and give you something that’s detailed to compare your actuals against.
Ideally as you’ve worked out the cost of a project, you’ll have:
- Estimated the hours, labour and materials needed, right down to the nuts and bolts
- Allowed a margin for overheads
- And also allowed a margin for profit
By the way - if you’re only allowing a 10% margin, it’s not enough for a custom builder to run their business profitably.
Duayne : Then, you can review your actuals. Each week, simply review what you’ve spent in:
- Your own hours on the project
- The labour of others on your team
- The materials you’ve purchased
Is this hard to do? Then look at what data you’re collecting on a regular basis.
Do you need to start keeping timesheets so you can track your time, and your team’s time more accurately?
How regularly do you invoice, and how do you prepare your invoices so you can know what they’re including?
Amelia : If you don’t have any administrative help in your business, this may seem overwhelming. However, a book-keeper may be a small and worthwhile investment to make, so you can be across this data and manage your cashflow more proactively.
Duayne : Many builders make the mistake of waiting until they’re meeting with their accountant to find out how much trouble they’re in. Don’t do that.
If you are collecting this data regularly, then make a meeting with yourself or your book-keeper to review it weekly. What gets measured gets managed, and when you get to know your numbers on a regular basis, you’re in a much better position to make good decisions about your business overall.
Amelia : Check the notes below where we share an easy win for you for your Tuesday Money-Maker, and ways you can next level this day of the Winning Week Challenge. We’ve also got a link to your Winning Week worksheet. And, there’s some more information and resources if you want to dive deeper.
Duayne : We’ll see you tomorrow for Day 3 of our Winning Week Challenge.
