If you’ve decided to go out on your own, I bet you’ve made a promise to yourself to do things better than your boss. I bet you have a solid idea of what you don’t want to do, but have you got a plan for building the business you do want?
As you know, strong foundations make for a solid, long lasting structure. It’s the same in business. Invest extra time now and it will pay off. You may think you don’t have the time but trust me you do. You won’t have it in a year when you’re chasing your tail trying to keep your business afloat.
In this article my aim is to give you a list of tasks that you can work through to strengthen your businesses foundations. I’m not going to go into the standard stuff, like ABN, business type, logo etc, you will easily find that information elsewhere. This list should get you thinking deeper about how you want your business to grow.
- Define your POD –
Most tradies line up a few months work before they resign from the easy life (yep, being employed is the easy option by far) with the hope that more work will come as the weeks go by.
Yes, it is important to line up some work, but the most important thing is what type of work that is. You need to set your Point of Difference (POD) and build your pipeline around that if possible, that way you will have started building your reputation around your POD.
- Set your labour rate based on YOUR numbers –
It is so easy to take a look around at what everyone else is charging and decide to do the same, but that is the quickest way to go broke! Yes, you can charge what everyone else is charging, but first you need to understand your costs and make sure there is a profit.
First set yourself a wage, what you want to put in your pocket each week. You will hopefully earn more through additional profits, but it is vital you set yourself a wage and call that a cost of business.
Next you need to calculate how many billable hours you will work in a week/year. No matter how hard you try, you won’t be able to charge for all of them. Divide your annual salary by your annual billable hours (the average is 1326 hours, which allows for 20% unproductive time) and you will have your cost per billable hour (e.g. $50,000 salary / 1326 hours = $37.70/hour)
Now you need to add your overheads to the labour to find out what your breakeven is. If you’re overheads are $20,000/year you will need to add another $15.08 to that $37.70, meaning you don’t make any money until you reach $52.78/hr.
- Systemise your business to maximise your profit and reputation –
When you’re a one-man band it might seem pointless to think about systemising your business so I’m going to spend a minute trying to convince you otherwise.
• The simple exercise of mapping out your cradle-to-grave (all the steps you take your client through, from initial enquiry to final invoice) is guaranteed to unveil many weaknesses in your business and will give you a massive opportunity to fix them.
• Clear and reliable communication with your clients will pay off. Clients who have a strong and reliable line of communication with you will be much more likely to trust you, and therefore forgive and accept mistakes.
• Clear and reliable communication with your subbies will also pay off! If you’re easy to work for/with, if the work is clearly defined, you become the easy work. The work everyone wants to win, because they know they’ll make money and it won’t be a headache.
• Systemising your business at the start makes it much, much easier to employ staff. The structure for communicating and delegating will already be in place, so you should have a smooth transition to putting on more staff.
• Systemising your business helps you get paid. Happy clients pay faster. Regular invoicing stabilises cashflow and keeps you on top of your bookwork.
So how do you systemise your small business from the start?
• The first step is to map out your cradle-to-grave.
o Decide how you are going to deal with your clients all the way through the process (e.g. you will log all enquiries in a CRM within 24 hours of receiving them).
o Decide how you are going to manage jobs. Map your cradle-to-grave first and then look for Job Management Software that suits your map best. You want the software to run as much of your business as you can, so you don’t spend hours doubling up on information.
o Decide how you are going to manage and communicate with staff, ideally it’s the same job management software.
o Decide how/when you are going to invoice and chase invoices, again it would be good if it was the same software.
• The second step is to implement the Job Management Software that suits your business.
• Next you need to set rules around each step in the cradle-to-grave, called Policies and Procedures. This not only gives yourself accountability, but it creates very clear guidelines for what is to be expected from colleagues and staff (vital if you have a business partner). Here are some examples of rules:
o “All new enquiries must be contacted within 24 hours of receiving the enquiry”
o “A client folder is created for each new client and is saved xxx”
o “A toolbox talk is carried out on site every morning at 7am. The form is saved here xxx”
• Lastly, you get to work following the rules and steps. The policies and procedures will need to be tweaked over time, but they give you a good, clear start.
- Plan for the future –
Not many tradies start their business aiming to still be a one-man band with a buggered back when they retire. Most want to build a business that affords them more family/ fishing time and fat bank account. If you want those things you need to plan for them or it’ll be 2035 and your business will look like it did in 2021!
Write down your vision, your long term goal. Then write down how you are going to get there. It is good to have an idea of where you want to be in 2035, but it’s more important to know where you want to be in 2024. 2024 is tangible, you can set achievable milestones to achieve your threeyear goals. Review your goals regularly (approximately every six months) and adjust your milestones to keep you on track.
Each one of these four tasks will take you hours, not weeks, to complete, yet the long term impact on your business will be profound. These tasks are the foundation to a solid business with huge potential for growth. Yes, all these tasks can be left to a later date, and they can (and should) always be done no matter what stage your business is at. But, the time you need to spend on them down the track will be more than double doing them in the early days. Invest the time now, while you have it. Trust me, if you don’t do it now you’ll struggle to find the time to do it in the future!
Please reach out to me if you have any queries or need any help starting your trade business, I’m more than happy to help out.