Cash Flow Episode 1: How To Have Better Margins In Your Trades Business
Click on the video to watch it (Runtime 5 minutes and 30 seconds).
If you’d rather read the transcript it’s here below.
Hi there. It’s Jon here from Small Fish Business Coaching.
This month I’m going to talk about Cash Flow. Cash flow as I’m sure you’re aware is very important. If you don’t have cash flowing in your business, things are very stressful and you can even go under. Not having cash flow or poor cash flow is the biggest cause of businesses failing. You can be profitable and have no cash flow and still be insolvent and go under. So it’s important.
What do I mean by cash flow?
I mean having enough money around to be able to pay for everything. When cash flow is tight, it’s not easy to pay everybody, and you’re scratching around, or you’re juggling, you’re putting people off and it’s a very stressful thing to do.
How can we loosen up tight cash flow?
I’m going to talk about five things. I’m going to make four videos because there are four weeks in a month but I’m going to talk about five things.
I’m talking about doing enough marketing, selling hard enough, working those two machines in your business so that there’s enough business coming in bringing with it some profit that you can use to increase the flow of cash in your business.
I’m not going to spend time on that today. That’s a marketing and a sales discussion. I’ve talked about both of those things before. So today, and this month, I’m going to talk about some specific cash flow related topics.
There are four:
- Better margins – If you’ve got better margins, the cash will flow better.
- Knowing your numbers – Knowing what your margins really are and not guessing.
- Dragging the money in sooner
- Actively managing your cash flow
Today, I’m going to talk about how to have better margins.
I spend a lot of time with my clients in the Tradies Toolbox Coaching Program, I spend a lot of time and energy working on pricing and working on charging more. The way to better margins, of course, is to have a higher price and lower costs. Charge a bit more and pay a bit less.
In my coaching, I’ve talked a lot about how we can charge a bit more and how we can justify that and how we can defend our price and how we can match our price point or our price position to our quality position in our marketplace. And that’s not what today’s about. Today is about a simple exercise.
Be like ‘Nike’ and ‘Just do it’. Just go ahead and put your rates up, your meterage rates or your hourly rate, your builder’s margin if that’s what you do, put it up a little bit 5% or 10%. Go on, I dare.
If you think I’m being silly I’m not. This actually works. I’ve done this countless times. If you really feel like you can’t, that’s your choice and your call but most of you, probably ¾ of you, will be able to put your price up a little bit without any adverse consequences. So go and have a think. Go and challenge yourself and I dare you.
I made a download which goes along with this video. There’s a link somewhere below. Download the little worksheet and write yourself a commitment of how much you’re going to increase your rates by and when you’re going to do it because nothing happens until you actually do something different.
You’re not going to change your cash flow if you listen to my video and say, “That’s interesting Jon”, and you don’t go ahead and do anything. So go ahead and do something. Put your price up that little bit.
Recommended Reading: Price Vs Risk Episode 2 – The Building Game (Sales Process Not Just For Builders)
We’ve talked about charging a bit more. Now I’m going to talk about paying a bit less. I’m very aware of the irony here that I’m saying charge a bit more but go ahead and tell all your suppliers that you don’t want to pay any more, in fact, you want to pay less’. I understand it’s ironic but we’re not here to worry about irony. We’re here to worry about your profits. What we need to do is approach all your suppliers, all your subcontractors or both and ask them to squeeze a bit harder. Ask them to give a bit more, not very much, 2% or 5%. Your material supplies I reckon go for 5%. You’re talking there to somebody who doesn’t often own the business, who possibly has the ability to discount a bit and many people that I know don’t bother asking. If you don’t bother asking, go ahead and ask. Make the calls.
If you habitually ask for better prices, be a bit more considered, add up how much you spend over the year. Make some other concessions like promising to spend more money with them, that kind of thing. And then with the subcontractors, if you put forward prices for a job that include rates from a subcontractor particularly for a builder, then go ahead. And when they submit their prices to you, ask them for a bit more and when you win a job and you’ve got an actual job to give them, ask them again.
This has happened to me throughout my career as a salesperson. My customers have done this to me. This is how to play. Go ahead and ask them for a bit more. 2% is very easy for somebody to give. So ask. “If you don’t ask, you don’t get” (my grandma used to say).
Here’s what you need to do:
- Go ahead.
- Put your price up a bit.
- Squeeze your suppliers and your subcontractors a bit as well.
- Go ahead and make those calls.
On the worksheet, there’s a space for you to identify all you major suppliers and subcontractors. Write their name down and commit yourself to when you’re going to go and do this.
I’m Jon from Small Fish Business Coaching. I hope you actually do this. I hope you do it and make a difference to yourself. If you’re a bit scared or a bit concerned about how you might do this, give me a quick call or book yourself a 10-minute chat with me, there’s a link below and I’ll talk it through with you.
See you later.