How healthy is your business?
The life of a tradie business owner is complicated. Many are still very much "hands on" working on jobs while also running the business, so managing the business essentials can be time consuming enough.
It might seem like you don't have time to step back and check the pulse of your business to get a feel for how healthy it is - but it's one of the most important things you can do.
We have put together a list of key indicators that you can use yourself to "get a feel for" the health of your business even if you aren't financial or strategic experts (leave that to your business coach).
List & Measure
The very first thing you need to do is list measurable aspects of your business and put in place methods to track these metrics. It doesn't need to be overly complicated, but a few simple processes well help your business identify vital signs and performance.
Below are some measurable components of your business that you should be keeping an eye on.
Are you getting paid on time?
A sure sign your business is in trouble is when customers stretch out their payment terms. We all know big companies tend to take longer to pay, so if this is the case make sure you have a good mix of small and large customers that keep your cash flowing.
When your customers are paying promptly it can be the sign of a healthy business.
Are your employees busy but not overworked?
A healthy business will use employee's time efficiently. If your employees either have lots of downtime where they aren't working or conversely have no downtime for reasonable breaks then this is a warning sign for your business.
Besides keeping your key people working during slow times, you also need to keep them happy and productive throughout the year when it's busy. If you work them too hard and they are struggling to get to the next job, quality may suffer or they may go looking for work elsewhere.
Establish measurable goals for your employees and then conduct regular reviews to make sure they are doing what is expected and ask them how things are going.
Are you winning new business?
It’s easy to get trapped into servicing existing customers and forgetting to go after new business. While it is great to have repeat customers it's important to keep a flow of new customers to avoid suffering significant downtime if existing customers go elsewhere or no longer need the services.
The more new business you bring in, the more flexibly your business strategy can be as well, allowing you to be more selective about the type of customer you want and prices you charge.
A good way to track this metric is to check the rate of new quotes you are winning each week or month - and compare this with a value that would grow your customer base even if you lost some existing customers (look at your historical figures to see how often you lose customers).
Are your customers happy?
It's important to keep your customers happy especially in the tradesman industry (plumbers, electricians, builders etc) where repeat business and referrals can have a huge impact on your bottom line.
Establish both formal and informal ways for tracking how satisfied your customers are with your performance - talk to your customers directly after a job is complete and follow up with feedback forms. Record all of the feedback you get and see if anything stands out as a problem with your service or your employees.
Talking to your customers about the work you did is such an easy thing to do and gives you a great insight into your business health yet it is often skipped by businesses.
Are you getting referrals?
Extending on customer happiness, one of the best ways of knowing whether or not your customers are satisfied with your performance is if you are getting referrals from existing customers.
You always talk to your customers before you do a job, so it's simple to put in a process to take an extra minute and ask how they found about you and record that with your notes about the job.
Are you hitting your margin goals?
We all know it is difficult to hit profit goals when times are tough, but if you constantly lower your prices at the expense of remaining profitable, you will not be in business very long. Make the hard decisions now to lower expenses and especially overhead expenses in order to meet your monthly profit goals.
Create a cash flow forecast
Although it may seem complicated, you will also want to create a Cash Requirements Forecast. In its simplest form, a Cash Flow Forecast should look out at least 30 days and tell you what fixed and variable expenses you will incur matched against Cash on Hand plus Accounts Receivable you expect to collect in the next 30 days.
Keeping your business healthy over the long run requires an ability to plan for the future, set measurable goals and then reach those goals on a consistent basis.
Set Your Goals
Now that you know which vitals to measure to determine the health of your business you can start setting goals for each metric. Keep a simple record of each metric and compare it against your goals to determine which areas you need to work on.
While tracking the above metrics yourself is a great start, the simple fact is a business professional (such as a business coach) will be able to setup and track these metrics and other metrics much more effectively. They will also help you with a business strategy if you aren't meeting these goals or want to set your goals higher.
At Tradie Accelerator our training programs combine both coaching and mentoring to get the best results, so feel free to contact us from our contact page or if your prefer to talk to one of our consultants call 1300 658 403.