For many contracting business owners, transitioning from a person being paid as a sole trader, effectively being paid for working in the business, to a business owner managing others is a challenge owners would like guidance on if they have not held a management position in a large business. The challenge is that they are skilled at their craft but less comfortable with delegation and business management. This blog can be used as a guide to help you through the early stages, with a focus on the finances, to ensure your business remains profitable at every stage.
1. Build a Financial Foundation
Before you can grow, you need to know your numbers. Start by getting a clear picture of your income, expenses, and profitability:
Track Everything: Use accounting software like QuickBooks or Xero to monitor income, costs, and taxes. Keeping everything digital reduces errors and saves time.
It is good practice, if the projects can be allocated a code, and they have their own profit and loss calculated. Keep the costs of overheads separate as these are spread over all projects. Know your overheads as a percentage of forecast turnover, this will help you price accurately and ensure you at least break even.
Create a Buffer: Aim to save 3–6 months of operating expenses. This will protect you during quiet periods or unexpected setbacks.
2. Streamline Your Processes
Running a business requires more than just doing the job; it’s about how efficiently you do it. Start by creating repeatable systems for each function that is required:
Marketing and business development
- Forecasting the turnover
Obtaining Leads
Bidding tenders
Securing work
Creating a project baseline
Estimating the cost of the works
Adding appropriate overheads and profit
Recording the mark-up on the estimate to make it a tender
Planning
Base line information / Drawing register
Understand the contract conditions
Risks for Health, Safety and the Environment
Organising a project
A procurement schedule
An information required schedule
An inspection and test plan
Payments
Client and subcontractor valuations
Goods received
Plant hire control
Reviewing a project
Progress – plan works versus actual works
Cost value reconciliation
Non-conformances on quality
Handover
Snagging process
Compiling the O&M’s
Contributing to the H&S file for CDM and BSA
Document Your Workflow: Write down how you handle each stage of a job, from initial inquiry to final payment. A major step is the introduction of IT as this standardises ways of working which others can then use.
Implement the use of software to manage the processes.
Schedule Regular Reviews and refine how the processes are done. Once you have systems, it then a case of arranging for others to carry out as you gain more business. Organising others to carry out the systems and processes leads to another series of skills to be understood:
Organisation structure
Internal communication
Personal time management
Delegation
Control of human resources
Control of the Supply Chain.
If you would like help putting in place any of the process mentioned, please contact me. Peter.Searle@ba4cs.co.uk
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