Operating on a tight budget?
We all share a desire to grow our businesses.
A common question we come across though is:
“How do you grow your business without money?”
In our 50+ accumulated years of experience dealing with a wide variety of clients, here are 5 things we’ve seen help to grow a trades business on a tight budget.
Most tradies enjoy doing paperwork as much as they enjoy hiring a bludger apprentice. But it is a crucial part of your business.
It’s near impossible to grow your business without money coming in. A common issue we come across is that invoicing only gets done weeks after a job has been completed.
This affects your cash flow drastically.
If you have an online system you should be preparing the invoice at the customer’s site and emailing it to them while you are there. Alternatively, get into the habit of doing your invoicing daily and emailing them to clients.
Settlement terms should be clearly stated on the invoice – the shorter the better.
There are many apps today on which you can accept payment immediately at the customer’s premises. This is ideal for cash flow.
On larger jobs get a deposit to limit your risk.
Keep track of income receivable
Having prepared an invoice, the next step is to ensure you are being paid.
Again, online systems can be automated to send out a reminder after a certain time period if the invoice has not been paid. Remember, this means you need to be up to date with issuing receipts. No customer enjoys receiving a reminder for an account they have already paid.
If a customer has still not paid you after the reminder, a gentle, friendly phone call normally works.
Staying on top of expenses – daily!
How do you grow your business without money? Don’t spend like you just won the Melbourne cup! Watch what you spend and how you spend it, especially when starting a business.
Many new business owners mix up their personal expenses with business expenses. We strongly recommend that you have separate accounts for business and personal. Treat yourself as an employee of the business and draw a weekly wage.
Beware of items such as GST which only gets paid every 3 months. Often, the money sits in your bank account and invariably gets spent. When the time comes to pay the GST there are insufficient funds in the account.
If this sounds familiar, open up a separate bank account and transfer the GST received from customers weekly into this so that it is available when you have to pay it to the ATO.
Credit cards should also be controlled as racking up debt on these is very expensive with interest rates normally close to 20%. We recommend that you pay your card off every month or use a debit card if you struggle to be financially disciplined.
Draw up a realistic budget and stick to it
You may not have much money but a budget will help you decide what you can afford and where to spend it, in order to grow your business.
Budgets are an integral part of successful businesses.
If you do not know where you are going you are lost. Budgets should be done from a zero base. In other words, don’t just add 20% to last year’s income and expect to achieve this. What’s your plan to achieve this growth?
Will you need to employ more staff? How many chargeable hours do you and your employees work in a year, taking public holidays, annual and sick leave as well as down time into account? Can you be more efficient?
Consider what your fixed costs are and which vary with turnover. You can then calculate your expenditure based on the expected turnover.
If you need help working out a profitable hourly rate, take a look at this free rate calculator tool we put together for tradies.
Provide excellence to your clients, no matter the job
You may not have money to burn on marketing to grow your business but you do have one of the best, free marketing tools available to you.
Word of mouth is a powerful force in most businesses, but especially in the tradie game.
Repeat trade and referrals from existing customers helps a lot of tradies grow their business.
Clients always remember a tradie who treats them respectfully and attends to any faults or complaints as soon as possible.
Social media & Google My Business can be very good for referrals but can also harm a business if you don’t pay attention to it and get more bad reviews than good ones.
Another affordable marketing avenue is business networks such as BNI. It has worked well for a number of our clients but does involve a bit of a time commitment. Contact us if you would like to attend a BNI meeting. We can arrange an introduction.
Grow your tradie business with expert financial advice
The final (bonus) tip to grow your business on a tight budget is to take advantage of the financial expertise and advice that your accountant should be offering you.
At Teamwork Accounting we not only remove the “hassle” of bookkeeping for you, but more importantly, we help you understand the numbers in your business. We explain your performance (in plain English) and enable you to make intelligent business decisions.
Not yet a client? We offer a free consultation to discuss your business and how you could save (money + tax) as well as grow your business. Let’s chat!