Make more money from your business
You may be satisfied with your business. On the other hand, you may want to make a lot more of it. This article looks at some ways that you can generate more money, whether you are a one-man band or run an ambitious, growing business.
Nobody can deny that it’s hard work running an installation / electrical / heating business. When you start off, you need to be good at your trade. But to make it really work you have to find customers and master then the paperwork side of the business too. To go even further, you need to be ultra-organised and great at recruiting and managing staff.
It’s not surprising that some people would like to make more money from all of their efforts, but aren’t sure if they can. This article tries to help you to decide on the best course of action.
Why you went into business
We all go into business for different reasons. Some would like the flexibility to take time off and pick up their kids from school. Others just can’t work with a boss. Yet more have bags of ambition while some are perfectionists that never want to make a compromise and need complete control of their work.
Whatever the reason, most people would like to make a bigger profit. Profit is the oxygen of business, it’s needed to survive. So, whatever your objectives, making more profit makes it both more rewarding and easier to meet your objectives. Let’s look at some of the ways how.
Charge more but do a great job
Many installers want to give a good deal to their customers and that’s highly commendable. But if you look at the car market you can quickly realise that people don’t just buy on price. The Dacia Sanderos is the cheapest new car in the UK and costs just £5,995. Yet it doesn’t even figure in the top ten sellers.
The single biggest mistake that people running trade businesses make is to under-price. But charging a fair to high end price must be combined with doing an excellent job. The vast majority of people are happy to pay for quality, but will be infuriated if they pay top dollar and then receive shoddy work.
There’s another reason to charge a good price. That’s because not only does it enable you to do a great job it also means that you can show some flexibility with small extras or changes to the spec. Doing this will help your reputation and a good reputation is the way to get more business, with 70% of work for homeowners coming from recommendations or previous work. With more incoming business opportunities, you don’t need to compete on price so much. It’s a virtuous circle.
Keep costs under control
You may remember the saying that you can be penny wise and pound foolish. An example is when you negotiate hard on a cost that doesn’t matter, while paying larger bills without a murmur.
The key is to look at your costs over a whole year and then work on reducing the items that you have spent most on in the year. For materials, Screwfix and Toolstation are great benchmarks as these guys tend to start out at reasonable prices.
What about the van? Is this the biggest cost? How hard have you shopped around to find the best leasing deal? There’s Grahams with a club that aims to help, then Vanarama to try as well. You get the idea.
My business partner knows someone who used to be the marketing director at B&Q. Astonishingly, he said that installers can buy up to 30% of materials “on the day” from local retail outlets. That means that they can pay full retail price as well as missing out on credit. It generally takes at least an hour to get materials. That is by the time you have interrupted work, hopped in the van, parked, found what you want, gone through checkout and then driven back. This is all potential profit.
Plan, be organised and consider automation
The way of addressing the wasted time and cost of the unplanned visit for materials is planning. Planning is also the key to efficiency, making sure that everything and everyone is on site when they are needed, so there is no unnecessary hanging around. If you charge the customer for time that was essentially wasted, that’s bad in all respects. It’s money you could have had by completing the job faster and moving onto the next opportunity.
One of the clients of my company, Marcelle Stoughton of fast growing Fencing Services, has this advice: "To be profitable, be as efficient as possible".
Being well organised means getting jobs done quicker as well so there’s less cash tied up in work in progress.
Obviously, I am biased but I must mention the thing that both my company Powered Now and others do – computer automation. With the increasing use of smartphones and tablets, there are more and more solutions for the trade that run on these devices. They save huge amounts of time as well as getting rid of lots of hassle. Ease of use is much better than it was during the era of old steam-powered PC’s and the mobility of these new devices adds a whole extra dimension.
Our customer survey found that business owners using our system saved many three hours each week as well as a range of other benefits and I’m sure similar results might be achievable with our competitors. That’s a lot of free time or extra chargeable hours – several days per month!
Specialise, even if this means avoiding the unusual
It seems obvious that you should go for any work available, but the people making the most money are often those that specialise.
You might think that you already do this, but you can only say you are a real specialist when you consistently say “no” to work outside your speciality.
For instance, think of installing harden gates. Lots of sparkies won’t take this on as knowing exactly how to configure the system, what the safety regulations are and so on is pretty hard. That leaves a profitable opening for the specialist. When you specialise it should mean more profit, resulting from:
* More self confidence. It’s great being a specialist and knowing your business backwards. Customers will pick up on your confidence and an honest description of the job will usually mean that you beat any competition. Most customers understand that it’s unlikely you can be good at everything. That’s why people use main dealers to get their cars serviced, even though they cost more.
* It’s another way of improving efficiency. That is because your field is narrower so experience means you can do jobs faster at a lower cost. Practise makes perfect and another benefit tends to be getting better volume discounts.
* You are much more likely to win business if customers are particularly looking for your speciality. For instance, you might only ever install Vaillant boilers.
Mark Goodchild of electric-call.net puts it this way: “We don’t cover all types of electrical installation as it’s impossible to be good at everything. For instance, we don’t do solar. This decision came through experience".
Expanding your business creates the opportunity to make more money, but comes with its own challenges. That’s why you need to plan your expansion carefully. To start, expanding usually requires cash both for marketing and to fund additional work in progress. You may need to take on more staff and maybe pay for one or more of likes of Checkatrade, Rated People and Mybuilder to see if these can work for you. Experimenting and preparing is hard and in the short term that might mean lower profits. You could scale up slowly using sub-contractors, but then you need to watch quality.
Whichever route you take to expand your capacity, it’s necessary to get more business coming through the door.
There are hundreds of thousands of trade businesses with owners are making a decent living in the UK. However, it’s always a good idea to stand back from time to time and examine the things that you could do differently. I hope that some of the ideas here are obvious because doing complicated things can be the enemy of success.
Ironically, getting around to doing the obvious is often a challenge. Doing something exciting and less likely to succeed can be more appealing. I just hope that reviewing your options can help your business generate more cash. Good luck with that endeavour!