4 THINGS YOU MUST KNOW TO RUN A SUCCESSFUL BUILDING FIRM
Ever feel like you’re “in the dark” when it comes to the business side of your building firm? We’re talking business planning and forecasting – cashflow, profit, overheads. Does it seem like running a successful firm is a slog…? Being a small business owner isn’t easy – but arguably it’s even tougher for those working in the construction game. The UK building market a highly competitive and volatile environment. To ensure your business thrives, you need to have a good understanding of all your income and outgoings - and you need to be clear on what you’re aiming for going forward. In this article, we discuss why these elements are critical to achieving success.
1. COSTS
Managing costs is key to the longevity of any business, but it is particularly crucial for building firms. With slim profit margins and strong competition, you need to pay close attention to your costs in order to win work and remain profitable. If you have a good grasp of your income and outgoings, you can make well thought-through decisions about what you charge, the type of work you target, and how you manage your resources.
We’re referring to both direct and indirect costs, including building materials (of course it’s vital that you use the latest prices), manpower, tools and plant, and business overheads. By keeping tabs on your costs and analysing them carefully, you can spot areas to make savings, which will eventually lead to improved profitability.
2. CASHFLOW
Cashflow is fundamental to any business, and this is especially true for small building firms. Managing your cashflow effectively is key to ensuring you have cash in the bank to cover your outgoings and extra to invest in the future. It may sound obvious but without a positive bank balance, you’ll soon having trouble paying suppliers, your workforce, and other expenses, which can quickly spiral into bigger financial problems.
You should have a clear view on your cash into and out of the business, including customer payments, expenses, and finance repayments. Putting spare cash aside every month is a good habit to get into, to cover any unexpected outgoings or delayed payments. By keeping a close eye on your cash flow, you’ll be able to quickly identify potential issues as they arise meaning you can take action to avoid bigger problems. It takes just one disputed payment when a materials invoice is due, and financial difficulties can snowball. Download a free spreadsheet for forecasting cash flow.
3. PROFIT
Profit is the aim of any business (otherwise, what’s the point?!) If you can fully understand your costs and proactively manage your cash flow, you’re well on your way to achieving your profit. Sadly, running a building firm is not just about bricks and mortar, it’s a numbers game.
To be frank, the effort that goes into every project is pointless if you haven’t made money by the end of it. Savvy building firm owners are selective about the projects they work on. They settle on a decent profit margin and stick with it. They understand that the profit margin has nothing to do with outgoings and overheads. It’s a completely separate figure, over and above these costs, to use in an emergency, to save towards a pension, use for expansion etc. We could go on, but instead we’ll refer you to a really informative chat we had with building owner mentor, Simon Lazarus.
4. AMBITIONS
Finally, successful building firms are built on clear aims and objectives – it’s essential to have goals in mind. For example, you may be striving to:
Increase profits: as we’ve already discussed, you need to keep your overheads down, improve your efficiency, and charge what you’re worth
Build a strong reputation: in addition to delivering quality workmanship, thriving building firms give first-class customer service, providing professional-looking estimates, communicating well and finishing the project on schedule.
Target a different market: Improved profitability comes not from more work, but from better work. Think about targeting the larger, high-quality projects.
Focus on training and development: Keeping abreast of the latest building techniques, materials and technology is vital in a constantly evolving industry.
Expand your services: Why not branch out and offer a Design & Build service? Designing in-house provides another source of income and removes all the time and money spent liaising with architects.
Modernise operations: Streamlining your processes can free up time, decrease costs, and raise customer satisfaction levels. Are there processes you can streamline? What construction software solutions would take a load off your mind and save you time?
We realise there’s a lot more to a thriving business, but these factors are key to success: understanding costs, cashflow, profit and, crucially, the goals you’re working towards. For long-term success, you need to focus on the right type of customer, continually look to improve your services, and stay ahead of the competition.
WANT a thriving building firm? WE’RE HERE to help!
Our software tools are designed to streamline admin, reduce the burden of endless paperwork and create time to think about the direction of your business. Talk to us on 0117 016 7898 about EstimatorXpress or our Take-off & Estimate Kit for prompt, accurate estimating and PlansXpress for your professional CAD drawings. You can book a quick 1-2-1 walk through of the software or enjoy a free 14-day trial. Good luck!