Blowing up the boom!

Are you experiencing good times? Here are the top three areas of your business you should be focusing on to make the most of it

Have you found yourself uttering any of these phrases during the past few months?

• “All my jobs come by word of mouth – I don’t even advertise.”
• “I have so much work that I don’t quote anymore – I just do charge up.”
• “There’s so much demand, I’m working longer hours.”
• “It’s hard to get good staff, so I’ve gone back on the tools.”

If the answer is yes, then you’re probably experiencing a boom. Great! But while a boom brings benefits, it also has challenges that can cause inexperienced business owners to come unstuck.

Most experienced business owners (who have been through growth and recession before) recognise the challenges of boom times. They know SMEs struggle in recessions if they don’t adapt quickly enough to market changes or when they don’t stay on top of their accounts payable. They also know that, even in growth, SMEs struggle with cash flow, price increases and supply and labour constraints.

You may notice that most corporates seem to ride out both recession and growth. While this might be partly due to guidance from professional staff or a global reach that enables them to spread the risks of one market into another, those aren’t the only reasons they survive. They also stick to proven business practices.

Outlined below are three disciplines that can strengthen SMEs during the growth phase of the economic cycle.

1. Increase your financial oversight

I meet countless builders currently who are so busy that they have offloaded their financial management to an assistant, outsourced it or just let it pile up. While I am a firm believer in delegation, when I meet a business owner looking for financial direction from assistants, I know I am seeing someone who has reached the upper level of their ability.

This lack of insight may cause them to make risky financial decisions that could affect the longer-term viability of their business. For example, going for rapid growth in revenue (because we are in boom times) at the expense of profitability, feels good for a time but can herald disaster!

Bigger business, bigger costs

The thing is, in the rapid expansion phase of a building business, wages and supply costs can outstrip income as more builders and subbies are engaged, with a corresponding increase in the number of invoices needing to be paid – often before payments are received from customers! An inability to pay these bills can severely limit a business’ ability to operate.

If a rapidly growing company needs an injection of cash or an overdraft facility, it’s best to organise this in advance. Another option is to amend the company’s terms of trade with contractors and suppliers to improve cash flow; however, this needs to be instituted early enough to have an impact and not hurt existing relationships.

Your assistants may not know the level of future sales you have been making, nor how these will impact the business. So relying on them for financial advice could be risky. You, as the business owner, need to exercise foresight over your future cash flow demands.

Your assistants should be supplying all manner of information to indicate the financial status of the company, but the overall direction of the company is too important to be delegated. Setting direction is your role as business owner.

It’s important that you know how to read your financial indicators and how to identify areas where you need to put better strategies in place. You don’t need to be an expert in all the strategies – just be aware of when and where intervention is needed. Once you know the nature of the intervention, you can search for help.

2. Strengthen staff training

In recession, there are often many applicants for every job and your company doesn’t need to do as much training or recruiting – just good screening to fill your staff requirements. But in growth, there are fewer applicants, often with lower levels of skill. Training is needed to bring them up to the standards you require.

You may have noted that, in growth times, corporates add team trainers to their HR departments. However, these same people are the first to be let go in recession.

During growth, when you are busy – and don’t have the time – is precisely when you need to take a leaf out of the corporates’ book and put in place some really good training processes. Do it now, before you are desperate. You need to give more training to new recruits in periods of growth. An added benefit is that as you spend time identifying and teaching your procedures, you will be likely to find areas where you can improve your processes. Thus, as you expand your team, you are likely to do so with better systems and (hopefully) fewer problems.

3. Keep abreast of new technology

Successful corporates invest in staying current. There is no question that technology is changing how we do business. Desk phones are almost obsolete, online apps deliver high-powered functionality wherever you are at low cost. Programme scheduling, customer and supplier connectivity, recording and almost everything else can be conducted through handheld devices.

Technology is also changing what and how we build, the materials we use and the systems involved. Change is a constant and keeping up can feel like an uphill battle.

However, smart business owners use busy, profitable times to invest in learning, visit trade shows, research markets, listen to industry experts and social commentators and check out new developments in architecture and engineering.

Sure, no one can keep up with everything, but developing an inquisitive attitude towards technology will ensure you are not left behind.

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Graeme Owen, based in Auckland, is a builders’ business coach. Since 2006, he has helped builders throughout New Zealand get off the tools, make decent money, and free up time for family, fishing, and enjoying sports. www.thesuccessfulbuilder.com