Four things you should know to help your building firm succeed

Do you sometimes feel you’re in the dark when it comes to understanding your costs, cashflow, profit, overheads – does wanting your building firm to succeed seems a slog…? It’s not easy for any small business owner – but even harder for someone working in construction. Small UK building firms operate in a highly competitive and unpredictable market. So, to have a consistently thriving business, you really need to be fully aware of all your income and outgoings and what you want to aim for going forward. In this article, I’ll explore why these elements are critical and how they can help drive business success. As a Managing Director myself I recognise the difficulties business owners face!

1. Costs

Managing costs is critical to the success of any business, but it is particularly important for a building firm. With razor-thin profit margins and intense competition, you need to keep a close eye on your costs to remain competitive yet profitable. By understanding your income and outgoings, you can make informed decisions about pricing, the type of projects you go after, and managing your resources.

I’m talking about direct and indirect costs, including materials (and it’s crucial you use the latest prices), labour, equipment, and overhead expenses. By tracking and analysing your costs, you can identify any opportunities for cost reduction, which can ultimately lead to increased profitability and greater success.

2. Cash Flow

Cash flow is the lifeblood of any business, and small building firms are no exception. Effective cash flow management is essential to ensure you have enough cash on hand to cover your expenses and invest in the future. Without positive cash flow, you’ll soon struggle to pay suppliers, employees, and other expenses, which can very quickly lead to financial difficulties.

You should be aware of your cash ‘inflows’ and ‘outflows’, including payments from clients, expenses, and any loan repayments. Siphoning off spare cash every month can help to cover unexpected expenses or shortfalls in cash flow. And by keeping tabs on your cash flow, you’ll be able to identify potential issues early on and take corrective action before they become a problem. All you need is a slow payer or a dispute and a builders merchant invoice to pay, a hire charge… it doesn’t take much for issues to occur. Download a free spreadsheet for forecasting cash flow.

3. Profit

Profit is the ultimate goal of any business. By understanding your costs and managing your cash flow effectively, you’re already on your way to protecting your profit. Running a building firm is a numbers game – and you thought it was about bricks and mortar!? Being brutally honest, the blood, sweat and tears that go into every job are pointless if there isn’t a decent surplus at the end of it. You need to pick and choose your jobs, and decide on a decent profit margin and stick with it – and don’t forget your profit margin is nothing to do with your outgoings and overheads. It’s a completely separate amount to use in emergency (see Cash Flow above), for your pension, expansion, new kit etc. I could write at length on this subject, instead I’ll refer you to a really enlightening chat I had with building owner mentor, Simon Lazarus.

4. Goals

Finally, any building firm wanting to succeed should have goals – it’s essential to have something to aim for. So, for instance:

  • Increase profitability: as I’ve outlined above, you need to keep your overheads low, improve your productivity and efficiency, and charge competitive prices
  • Establish a strong reputation: as well as providing quality workmanship, you should provide excellent customer service, quoting promptly with a professional-looking estimate, communicating well, finishing the job on time.
  • Change up your customer base: Decent profit comes from better work, not more work. So, think about going after larger, higher quality projects.
  • Invest in training and development: In the constantly evolving building industry, it’s worth staying up to date with the latest techniques, materials, software and technology.
  • Diversify your services: Why stop at building someone else’s design? Why not offer a Design & Build service? It’s an additional source of income and eliminates all the comings and goings with the architect’s practice.
  • Streamline operations: Streamlining your operations can help you save time, reduce costs, and improve customer satisfaction. And importantly give you some free time. What processes can you streamline? What construction software could take a load off your mind and make your business more efficient and profitable?

Of course, there’s so much more that goes into a thriving business, but key to success; being on top of costs, cash flow, profit and importantly the goals that keep you moving forward. Ultimately, you need to focus on the right kind of customers, continually strive to improve your services, and stay ahead of the competition.

Want your building firm to succeed? We can help!

Our software tools are all about streamlining admin, taking you away from endless paperwork and giving you time to think about the direction you want to take your business in. Talk to the team on 0117 016 7898 about EstimatorXpress or our Take-off & Estimate Kit for prompt, accurate estimating and PlansXpress for your professional CAD drawings. Book a quick 1-2-1 walk through of the software and enjoy a free 14-day trial. Best of luck!