I was recently described by one client as a fairy godmother for business and it made me reflect on some of the more common challenges I’ve seen cropping up among clients lately. It’s not really a fairy godmother they need (or indeed get) but often just an adjustment to day to day practices and thinking.
Many of my clients are new SMEs, single operator or family operations, including a wide variety of tradies. Some of the most common issues I’ve found of late include:
- Insufficient mark-up on stock or parts they purchase at wholesale or trade. If the public can’t easily purchase at that rate, you can easily justify charging mark-up that better reflects the retail or public prices.
- Undervaluing services. A common thread for tradies, for instance, has been not charging a premium for emergency jobs, so it’s important to consider supply and demand when setting prices. Sure, price yourself well in terms of competitors, but make sure you’re not too cheap, which often makes customers suspicious. Particularly in the case of tradies cheap rates can also mean you’re running yourself into the ground for little return and you wonder about returning to work for someone else instead.
- Excessive time/energy spent on tasks business owners aren’t highly skilled in. Consider the tradie who has to say, “No,” to jobs for $80+/hr or more to instead do paperwork they not only don’t like doing but aren’t proficient at. An alternative is to find someone proficient in the things you’re not good at for a lower rate than what you can earn. The reality is your 10 hours a week on paperwork could be five hours or less at half your rate for someone skilled in that area.
- Not making the most of technology. A client told me they had ditched a popular accounting program because of the cost. In the discussion they confided the cost was $450 a year. The paper system they returned to takes a bit long but there’s no subscription cost. If it takes 10 mins extra a day on weekdays that’s the equivalent of over 40 hours a year. The program cost was $450 a year and his extra time spent on the old system was conservatively $3200. When making decisions about technology always be sure to consider the cost of your time, especially if you’re in a service industry.
- Taking on staff simply because they’re busy. This is a big decision and a common mistake is employing someone as a knee jerk reaction. If you can’t keep up with the workload consider a triage approach to customer calls. Is there someone nearby who does similar work to you who you could recommend? I’ve recently seen some great spirit of cooperation among tradies, particularly single operators who have not only shared the clients but even teamed up to take on bigger and more lucrative projects. If you do look at employing someone make sure you can realistically expect your profit line will grow markedly. If you’re looking at doing not much more than cover their cost it’s probably worth getting a second opinion on your options or having a look to see if efficiencies can be gained elsewhere in your business.
Take a moment to regularly reflect on your business operations to see if through some small adjustments you can make life as a small business owner and operator a much easier road.
*Written by Carolyn Jeffrey, the principal of CJ’s Business Solutions. For more help with any of the matters covered in this blog visit www.cjsbusinesssolutions.com.au or call 0435 432 203.