The world has seen more twists and turns than a rollercoaster in the last few years, and it’s not about to get smoother anytime soon. There will always be things out of your control. Opportunities in business definitely will come to you.
We can either try to fight against them, with no success or switch our focus to areas of opportunity. Because despite all the doom and gloom we seem fixated on, there are lots of opportunities out there for your business!
The way to find them is to be curious about the things you can control.
At first, you might not know what that is. You don’t know what you don’t know, and that’s okay. By being curious and asking questions, soon they’ll become the things you know that you don’t know, and by learning, they’ll become the things you do know!
The best place to get curious is at home, in the nitty-gritty of your business.
Find opportunities in business with A.S.P.B
Assets
What are your assets? Your asset base includes employees, equipment, machines, vans on the road, supplies, etc.
Knowing what your assets are is only one piece of the equation. The important factor is knowing how much revenue you can generate from them.
Don’t limit yourself here. If everything was running full-time, at full potential, how much revenue could they generate you?
Sales
Where are your sales right now, and where are they projected to be in the next 6 months – 1 year?
You can have all the assets in the world at your fingertips, but they’re not doing you any good if you’re not filling your quote register and making sales.
You also want to be making sales to your ideal customer. Sales don’t automatically mean profit, which is where the next step comes into play. For 5 tips on how to become an ideal client magnet, check out our recent blog.
Profit
The key number here is your gross profit. How big is your percentage GP? Do you have a GP target, and are you hitting that target for each sale?
No business should have a lower GP than 20%. In fact, most of you should be aiming for 35-40% at least. There is the exception of builders, who should aim for around 20% because the margins are less.
Let’s say your assets can bring in $150k. That total could be £150k of low margin and high volume work, OR you could be doing high margin, lower volume work. Which means filling your assets with high-quality sales.
Bank
What is your cashflow like? For many businesses, cashflow is a mystery. They don’t understand what’s coming and going, which makes planning a nightmare!
Too many business owners also don’t chase customers for payment and get paid far too late; often several months after payment terms. There’s nothing more important in business than getting paid and paid on time.
Chase your customers! Anyone who doesn’t pay on time is a D-grade client, and you want your quote register filled with A-grade clients who don’t need to chase. Whether you need that money right now or not, it’s not doing any good sitting in someone else’s account.
Where is YOUR area for opportunities in business?
Get curious! Where do you need to focus to see improvement? You might need to get more out of your assets by driving more productivity and/or efficiency. Or you might need more sales. This could be the case if your sales are only $75k, but you have the capacity for $150k.
Here are a few potential scenarios you might face and what you should focus on to move your business forward.
A: You don’t know where to start with understanding your A.S.P.B
If this is the case, you don’t know your numbers. (And you should!) Always start by getting to grips with your numbers. They’ll provide all the clarity you need to understand where you are vs where you could be.
B: You have lots of random assets that you’ve accumulated along the way to fill temporary holes in the business, but you don’t know what to do with them now.
It comes back to the numbers. Create a list of every asset you own, and work out how much money can be made by using all of them to their maximum potential. When you can see everything you have in one place, you can plan how you’re going to use them.
C: Your GP is lower than your target
You either need to shift your asset utilisation to jobs that provide higher margins (and attract the customers looking for those jobs), or you need to reevaluate your pricing. Deciding the best path comes down to price resistance. If you don’t have any price resistance, your prices are too low.
D: You have the potential to do high-margin work at a large scale, but you’re currently doing mostly low-margin work.
This is a sales issue. Focus on sales consistency and finding your ideal target market. The trifecta you’re looking for is the ideal job at the ideal margin for the ideal customer. Don’t settle for anything less.
E: Your sales match/are getting close to matching the capability of your assets.
Look at how you can increase the capacity of assets. That might be seeing how you can use your current assets to turn jobs around quicker, increasing the number of jobs you can complete in the same amount of time, or expanding your asset base.
F: Your gross profit is all over the place. Some months are high and some months are low.
Calculate the difference between your highest gross profit month and your lowest gross profit month, and look at the daily difference. What were you doing during those higher months that you can replicate for the rest of the year? You might need higher-quality sales, to look at asset utilisation, or to evaluate your pricing structure.
Map out your A.S.P.B
You might figure out some numbers during this process that shock you. That’s great! Because they are fantastic opportunities to sink your teeth into.
If you’re looking for help and support while you navigate these new opportunities, join our Facebook group for Tradies and Construction businesses. It’s filled with like-minded tradie business owners getting insights from weekly tips, live streams, and articles.
Here’s to a great week ahead!
Damien Churton
Partner and Coach, Business Benchmark Group
