Here he goes again you might mumble.
'Doom and gloom, recession, recession, recession, that is all Phil Voice seems to be talking about lately'.
Believe me it is the last thing that I would like to talk about but I have traded through the last recession and it can be painful if you are not prepared for it.
There is no doubt that jobs will be lost, even without a major downturn as businesses are squeezed. It is the early reactors that will suffer less so I thought I would come up with a few pointers that might stimulate a few ideas.
Re assess areas of high cost.
Oil has certainly started to hit business costs and with a barrel now costing $96 or more we have got to start thinking about curtailing travel in search of work. A litre of fuel is £1 at the moment so at £4.50 a gallon, for those who prefer imperial measures; that's .02 pence of cost to you for every 10 yards travelled.
Depending on the size of your company, target work that is within a reasonable driving distance from your base. I often made the mistake of travelling 50 miles just to look at a job and often without success.
That 50 miles cost me half a day of my valuable time plus £10 in fuel. Imagine if you won the work - you will have to pay your employees to sit in the van for three hours of the day (depending on the traffic) and just one van sent to the job carrying heavy weight will cost you an extra £50 per week.
I often worked on sites where crews of landscapers or builders would be travelling from London to the South and I knew of local firms to me that would travel, with all the complications of congestion, into London.
It is a system that is fundamentally flawed. That is why I am a great believer working towards increasing brand awareness within your local community.
It took me many years to realise it but I found little need to target projects that are not within a thirty minute drive from us.
Perhaps my business location was perfect. We were based on the Sussex, Surrey and Hampshire borders with such catchments as Farnham, Haslemere and Petersfield all within a 30 minute drive.
The next area to look at is labour costs. How do you pay your workers for their travelling? Some companies pay a lower hourly rate but pay for all of the time they are travelling and some pay for one way only.
We had a system, which is a bit long winded to implement, whereby we paid our workers mileage. We worked out their hourly rate and divided it by an estimate safe average speed. £10.00 per hour divided by 30 miles an hour for example.
There are many permutations that can be applied but the bottom line is we all need to ponder the implications, sit everyone down and ask them to consider the economy and the impact it is likely to have on jobs.
Of course it also means tighter belts and less disposable income for your potential clients as well. With interest rates creeping up meaning higher mortgage costs and their own travel to work costing them more they will be less likely to spend money.
Some home owners will view their garden as a luxury and stop spending altogether which will be bad news for the many gardening related business' and competition will increase tremendously.
Think about how you can trim your cost to the client too. If you are building a patio and would normally charge 30% mark up on materials then reduce this.
Work out your break even costs for the whole business so that you really know what an hour of business is costing you as an overhead.
I worked out the annual mileage of a van and divided the total fuel cost by the mileage done and then worked out an average of miles per day per van.
If the job was five miles over the average I would add this cost to my calculations on the excel spread sheet. If it is not met as a cost it comes off the bottom line but you also still have to consider whether the client is likely to carry this cost.
Your own salary must be taken into consideration. Remember, if you are taking out £30,000 net of tax then you are needing to make £15.00 per hour, net of expenses just to pay your salary - can you continue to do this?
There are so many things that influence the profitability of your business and it is wise to consider the whole package carefully when things get tighter.
Good luck!
Recent Comments