Spring Clean Your Business

John Mann has delivered our pioneering Business Management Training VRQs for construction-related companies in the South West over the last two years. Here he gives us some ideas for a spring clean.

Winter has more or less finished with us and those businesses that have survived because they have been well run, lucky, or both can perhaps start to look forward to a slightly brighter future. Some indicators would seem to suggest that the recession is beginning to loosen its grip and that while the threat of a “double dip recession” still remain - prospects for the future are brighter for most. However, this does not mean that the survivors can relax - at the very least businesses should be analysing what they do and thinking about what needs to be done to position the business to extract the maximum benefit from any improvements in the economy.

So here are a few brief thoughts and ideas to help you look at the way in which you manage your business:

1. Concentrate on those activities that you know you are good at. When times are hard it is very easy to take on anything that might come your way even if you aren’t that good at it! All evidence suggests that this will only damage the business’s image and reputation, leading quite quickly to financial problems.

2. Understand why people use your business. What makes people use your business? Is it price, quality, trust or something totally different? What makes your business different from your competitors? Do you know who your clients are? If you can’t answer these questions you probably need to take steps to find out.

3. Make sure that any advertising you do is directly targeted at the people and businesses that you are trying to reach. Businesses waste a lot of money through “shotgun advertising” – advertising everywhere in the hope that somebody might be interested and follow it up. There is no point in advertising in the trade press when your market is domestic, and the local magazine, free press or a leaflet drop might be more appropriate and cheaper. At the same time any advert should make it clear what you want any potential customers to do – telephone, return a form, e-mail?

4. Make sure that you fully understand your costs. Many in the construction industry lose money because they don’t take all of their costs into account when pricing up a job. They are usually good at costing out the direct costs such as materials and time, but forget that they usually have a layer of fixed costs that need to be covered such as, the cost of premises, rent, power, IT, rates, administration, marketing, transport and petrol, professional fees for accountants and solicitors, insurance, tax and national insurance. The price that the business charges its customers and clients will need to cover ALL of these costs as well as a mark up for profit. If the job won’t cover the costs, don’t do it. There is no point losing money.
 

5. Don’t sack people that you will need in the future and don’t employ new people that you can’t afford. Before making a skilled and valuable worker redundant, think whether you are likely to need them again in the relatively near future. The cost of making an individual redundant and appointing a replacement may be greater than retaining them underemployed for a period of time. Similarly, it is easy to underestimate the cost of employing a new person. It isn’t just the cost of their salary -  the business also needs to add in National Insurance, holiday and sick pay, insurance and the cost of training. In addition, they will have to bring more money into the business than their total costs to make it worth employing them.

6. Now is a good time to innovate. Most businesses have cut back on operations in their traditional areas. As the economy recovers businesses are presented with an opportunity to develop in new areas, for example eco build. Recovery gives a business an opportunity to plan for the future and look at ways of increasing profitability. Remember point 1 however -don’t move into a new area unless you really do have the skills to deliver in it.

It is of course impossible to cover everything in a short article like this and there are many other issues that we will look at in the future.

Above all remember, regardless of the industry in which it operates, a business only has to do two things:

• MAKE ENOUGH MONEY TO KEEP THE OWNERS HAPPY
• PAY ITS BILLS