I often see overworked business owners caught in a vicious circle that prevents them from growing their business.
It starts with a nervousness about taking someone on to help because they think the business can’t afford it. They often make that judgment because there isn’t much in the bank account. But that’s frequently because invoices haven’t been sent promptly or followed up and I’ve seen situations where thousand of pounds can be outstanding.
So, we can see that extra help or admin support would be helpful. But to make a proper decision as to whether the business can sustain that cost we really need all the facts. And the starting point is to get an accurate view of the financial picture:
- what the business is actually turning over
- how much is spent on materials, labour and overheads
- what profit is being made on each job.
This shows us what has been sold and therefore what would be in the bank if there were no outstanding invoices. And highlights the profitability and average sale value per customer.
We can then take this information to create a financial forecast, which is basically a prediction of future sales, expenses and profit. And if we plug in the additional costs of taking someone on we can see what that does to the figures.
Plus, we can work out how much sales would need to increase to maintain profit at the existing level if we bring an additional person into the business. It’s often only one or two extra sales a week at most.
But we shouldn’t just consider the cost of taking someone on. We also need to assess how much time would be freed up if there were additional help in the business and how many extra sales we think the business could make with another person in place.
Looking at the figures in this way should clear the fog, break the cycle and point the way forward. Enabling the business owner to decide whether the time is right to take on help which could allow the business to grow.
If this information strikes a chord with you then there are lots more top tips and practical advice in my book ‘Build and Grow – How to go from Tradesperson to Managing Director in the Construction and Trade Industries’ And you can buy it from Amazon via this link http://amzn.to/2CBok2L.