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Managing your business during uncertain times!
The Global Downturn is very real and has various repercussions for different businesses and industries. There are many things we, (in the building industry) can do to mitigate risks and capitalise on opportunities which come up during these topsy - turvy times. Please find some areas to focus on in the coming year.
Harry Pontikis – Director
Financial Services
Master Builders Association
N.B. This article and its content is general in nature and is not meant to constitute Financial Advice.
STRATEGY:
1. Focus on new opportunities which exist in times of uncertainty.
2. Keep an eye out for ‘deals of the century’ – e.g. Forced property sales, deceased estates or semi completed projects in distress.
3. Look for properties needing quick settlements – if you have your funding organised, you can negotiate harder on the price.
4. Focus on the profitability of your business and business activities.
5. Manage costs conservatively – even if you are busy, tighten your belt!
CUSTOMERS:
1. Know who is a ‘preferred customer’ and why they are preferred.
2. Reward and recognise your current ‘preferred customers with cards, gifts or thoughtful actions.
3. Seek to understand your ‘preferred customers’ by asking them about areas you could improve in your business.
4. Get expert advice on attracting, caring and growing your clients. (Master Builders Business Advice service)
5. Ensure you and your staff are focussed on servicing your preferred clients.
FINANCE:
1. Plan your finance & lending needs for the next 2 years with your Accountant and Lending Consultant. I.e. if you need to borrow in the near future, have your tax returns in order and consider showing more income in your tax returns. If you do not need to borrow, ensure your current lending structure will serve your needs for the next few years and continue to minimise your taxable income.
2. Only deal with finance experts in YOUR industry. Deal with Accountants who specialise in the Building Industry and with Master Builder Financial Services. www.mbav.com.au Do not deal with home loan brokers or with the banks directly as there may only be 1 solution in the current environment. Do not take unnecessary risks with inexperienced people or with banks – focussed on their margins.
3. Insist on paying a Fee when asking experts to deal with your business’ finances - Applies equally to your Accountant and Lending Broker. This ensures they focus on your needs rather than making their commissions by selling you products or asking you to change banks.
Credit Risks:
1. Choose your customers well. This crisis affects everyone so do some diligence on your clients before undertaking any work for them. E.g. ask for a copy of their loan approval, ask for a copy of their Credit Report www.mycreditfile.com.au .
2. ‘Losing’ clients who do not pay are not really clients. Use a debt collector for well overdue clients or those who avoid you.
Cash flow:
- Do not be used as an interest free bank by your clients. Tighten your collection policies – reduce payment to 7 or 14 days.
- Do not expose yourself to costs your business cannot survive in case of non payment by 3rd parties. Have access to emergency funding in case of unforseen circumstances. E.g. Overdrafts / Lines of Credit.
- Insist on prompt payment – consider implementing incentives or dis – incentives to encourage payment behaviour.
Minimise Risk:
1. Take out income protection insurance.
2. Investigate Mortgage Protection Insurance if you have a lot of debt.
3. Have a ‘safety net’ established allowing you access to money in times of emergency.
4. Don’t count on selling a property as your safety net – the time it takes to sell and the value fluctuates wildly in this environment.
5. Don’t have ‘all your eggs in one basket’. Have at least 2 banks involved in your finances and ensure you broker manages this relationship well.
STAFF:
1. Identify and ‘lock in’ your good staff – this can be done with bonus’, career progression or extra responsibilities leading to new career paths.
2. Have easily measurable goals and objectives and ensure your staff know what you expect from them and manage them to these objectives.
3. Be constantly on the hunt for good staff.
4. Provide your good staff with Training opportunities and invest more time and effort during times of uncertainty.
5. Enrol your self and your key staff to the ‘Surviving the Financial Crisis workshops’ at Master Builders Association. www.mbav.com.au
MARKETING:
- Do not spend money on generating enquiries if you do not have the capacity to handle them.
- Do not spend money on generating enquiries if the people handling them are not sales people. Have a ‘conversion target’.
- Have a website - ensure it’s up to date and professional.
- Be part of the ‘Find a Master Builder Service’ where Master Builders provides consumers with your details for jobs.
- Be part of Master Builder’s ‘Lodge a Job’ service where you get to bid for jobs on the internet, lodged by consumers.
- Do not spend money on Marketing if you cannot track the money back to enquiries and leads. Don’t throw away your marketing dollars on gimmicks.
- Become known to the public for your projects by dealing directly via listing on websites like www.chocolateproperty.com.au
In our capacity as industry leaders, Master Builders is running a series of Workshops designed to assist you during these uncertain times. Enrol in the ‘Surviving the Financial Crisis Workshops’ to get information about the economy, the industry, banks and what support is available to you by accessing www.mbav.com.au or calling 9411 4555.
N.B. This article and its content is general in nature and is not meant to constitute Financial Advice.