WHAT MAKES A BUILDING FIRM THRIVE
What does a thriving building business look like? We recognise that every building firm is unique but there are common features of successful building companies. The suggestions below stem from chats we’ve had with numerous business owners.
ALLOW US TO INTRODUCE HARRY BLOGGS – OWNER OF A THRIVING BUILDING FIRM
“Harry Bloggs” is the owner of a building firm, let’s call it HBXL Design & Build. Harry launched his business in 2013 after spending several years working for some other builders. Harry went from running a building firm that barely covered its costs to enjoying good profits. He no longer works out of his home but is based in an office. He has an accountant, a part-time administrator and a full-time site manager and estimator called Steve. Harry has a regular team of sub-contractors.
HOW DOES HARRY MEASURE SUCCESS?
He’s not working on the tools
He doesn’t spend his evenings estimating
He has his own premises; he doesn’t work from home
He doesn’t have to rely on his family to help with paperwork
He has a good handle of his cash flow
He has savings in the bank
He’s paying into a pension
He has a good work/life balance
He has a plan in place for retirement
We’re not talking about flash stuff - sports cars, second homes and so on. What we’re describing is a solid business that will endure financial challenges (which always occur). If Harry carries on with this approach, he can look forward to a lengthy and successful future.
WHAT’S THE SECRET TO HBXL DESIGN & BUILD’S SUCCESS?
HBXL Design & Build wasn’t an overnight success. Harry made some mistakes in the early days, including under-charging. He made the occasional loss on a job and made a few poor decisions. Fortunately, he was enthusiastic, he was willing to learn and – crucially - willing to change. These are the six pieces of advice he followed.
1. SET SOME BUSINESS GOALS
Harry didn’t start his own business, with all the risks that go with it, to feel stressed, out of control, stuck, exhausted, earning a minimum wage etc. He wrote down what he wanted from the business, then and in the future. The kind of money he wanted to earn was going to take some work!
2. BE PICKY ABOUT THE JOBS YOU WORK ON
Harry had already found out that taking any job that came his way and charging competitively (AKA too cheap) was a recipe for disaster. He was winning the majority of jobs he quoted for because he was under-quoting. He learnt that there was no money to be made in getting referrals from people who he’d made ‘next to no money’ from. He began thinking about which jobs were most profitable – and realised that larger extensions were the money-makers. He focused on those projects going forward. No looking back or down. He was looking up. Harry was planning for a better future.
3. build FUTURE OVERHEADS into today’s costs
Harry reviewed his overheads, identified unnecessary ones and reduced outgoings where he could. Then he calculated the cost of everything on his “wish list”, including an office and staff. He needed to be making enough to cover these costs in order to turn his wishes into a reality. He reasoned that his competitors already had offices and employees – and included these overheads in their quotes - and he wanted to compete on their level. So, he began to allow for these overheads in his current quotes. Clever, right?
4. include everything in your estimates
Harry included a portion of his company’s overheads in every estimate. He also added a percentage to cover wastage of materials and wear and tear of tools. To that figure, he added an allowance for inflation. And of course, he ensured that his estimates were 100% accurate – down to the last hour of labour and tube of mastic. He promised himself he would never again dip into his own back pocket to cover items he’d forgotten.
5. add a decent PROFIT markup
Harry’s experience early on taught him that slapping 10% “profit” on wasn’t the way to go if he wanted a sustainable business. Profit is not an ‘added bonus’. It’s essential for building a robust business which can ride out bumps in the road. These days, Harry adds at least 25% into the profit markup field in his estimating software. Profits are used to upgrade equipment, fund bonuses, contribute to pensions and, importantly, to build savings for quieter times. Harry might decide to sell his business in the future or close the business with a decent lump sum in the bank. Building profit into the business gives him options.
6. deliver smart customer quotations
As Harry was targeting higher end projects, he took steps to ensure his estimates were professional and detailed. No more “one side of A4” estimates with little explanation of costs. A client investing £200,000+ in their dream extension needed evidence that Harry’s building firm was the right one for the job.
READY FOR your business to THRIVE too?
Stick with it. The bigger profits didn’t really kick in for Harry for several months. But he was expecting this.
It took courage. At times, he had to sit on his hands until a profitable project came along. That porch extension for a neighbour was a thing of the past. Taking on technology, trying new approaches, delegating… resulted in money in the bank and money tucked away for retirement.
We’re here to help you with your own story. We want you to be the most successful building firm you can be. Call us on 0117 916 7898 and we can advise you on estimating and set up a short online demonstration of EstimatorXpress or download a free 14-day trial. (We also sell CAD software, Health & Safety software and Customer Contract software too.) We’ll work with you as you master the software and support you go after those more profitable projects!
Catch up with our “Running a Small Building Firm Podcast” for further business advice:
Watch Episode 5: Why you’re under-charging and how to change >>
Watch Episode 6: Simple changes to your quoting that will make you more money >>