Married to the business is a series of posts about a married couple who together run a building business. Mike is a certified registered builder and Lyn runs the office for Mike. In the last post Mike and Lyn realised that they needed advice on how to run their business.
The first thing their new business advisor did was to review their Profit and Loss statement, which at first glance showed a healthy turnover, but on closer inspection revealed hidden cross subsidies in their business.
Many of the projects they took on were money losers from the start and any gross profit generated was insufficient to cover the true overheads of their business.
As the advisor explained this, Mike and Lyn had quite different reactions. Mike became frustrated and impatient because he really did not see the value of the analysis, which appeared to him just moving money from one area of their accounts to another for no real benefit, although he was shocked about how little money they were really making.
Mike had left the bookkeeping to Lyn and while he was responsible for the quotes he was never really sure what the real position was in the business at any given time with multiple projects on the go.
Lyn, on the other hand was excited by the revelations. While she had no formal training in accounting, but by asking questions, she quickly understood why the business was in the state it was. While not sure what the solution was at this time, she started to understand the problem.
They did not really know how much each project was costing them with cost blowouts regularly occurring, and their whole business was just cashflow management. Chasing clients for payment, then paying some creditors that couldn’t be deferred any longer. They had no picture of where they were going even over a 90 day period. It was all hand to mouth and the amount left over for their wages was certainly not in any plan.
Lyn could also see they were not charging enough to cover their costs, but Mike was concerned that if they increased their prices, they would lose clients and go out of business.
The Advisor said, “You are going out of business now. While you can and should reduce your costs through better management, more opportunity exists on the price side. That’s where the marketing starts, but before we do that, we need to find out what we need to change to make your business profitable.”
After the Advisor had left, Mike and Lyn discussed the meeting. Mike was still not convinced, and wondered: “Can we afford to continue to pay this guy?”
Lyn thought for a bit and then replied: “Finally, I can see what is happening, and even see a glimpse of light at the end of the tunnel.” She was thinking how glad she was that she had found him. “For the first time in a long time I have hope and am prepared to continue supporting the business.”
On reflection, Mike decided that was possibly the best reason to keep going, because Lyn was happier than he had seen her for a long time, even if he still thought the guy charged too much.
Over the coming months, I will look more closely at the special issues facing Lyn and Mike, and other couples who are married to the business.
If you are married to the business, please tell your story in the comments below or visit our Facebook page or website.
May Your Business this Year be – As You Plan It.
Over to You. What do You Think? Post Your Comments Below.
Dr Greg Chapman is the Director of Empower Business Solutions and The Australian Business Coaching Club and is Australia’s Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.