Over the years I’ve had plenty of new clients come in the door who are, frankly, pissed off with their existing accountants because they haven't been told these things until it was too late and also, to be honest there have been a few occasions when I should have been more forward in raising these things with some of my clients - nobody’s perfect.

In this episode I give you three questions that your account should be helping you answer:

1. “How come I’m making profits but I never seem to have any cash?”
   
   
2. “Why do I have to wait until the last minute to know what my tax situation is going to be?” 
   
   
3. “What are some simple things I can do to increase my profits?” 

And If you're not getting answers to these questions, I tell you what to do about that...

I’ll bet that there’s a lot of things about your business that your great grandparents would recognise. Customer service, dealing with suppliers and managing employees. Some fundamental things simply never change. 

So, what’s a workflow management system for? Well, in a word - efficiency.  That's because the alternative to having a workflow management system is to simply keep all that information in your head, which of course is not a good place to keep it, because it tends to crowd out the things in your head that are much more important - like dealing with customers and suppliers and planning things and actually getting work done.

The variety of software solutions in the marketplace is absolutely dazzling. There’s:

• Simpro
• Tradify
• ServiceM8
• Fergus
• FieldInsight
• Aroflow

And the list just goes on…

Now, most businesses find themselves in one of three situations. Firstly, you might be looking at introducing your first cloud based system. Or, you might already have a system that you’re not happy with and you’re looking to change. Or you might be happy with your existing system but you can see gaps in how effectively it’s working for you. 

Regardless of where you’re at - I’m about to tell you where you should start when you want to choose, or replace or improve your workflow system.

This is what you do:

Find yourself a quiet place for ten or fifteen minutes. Make yourself a list of everything that you want your workflow system to provide a solution for.

Here’s a sample of ten things that you might find on your list. Your list will be different and probably longer but it will show you what I mean.

When you’ve created your draft list, take a look at the websites for various software vendors and see what other features are available. There are probably things that you’ve forgotten about.

And when you’ve set up your list, mark each item as “must have”or “would be good to have” or “not very important”.  Then, if you’re looking at investing in a new system, you’ll have a great starting point for evaluating each of the candidates. And, if you already have a functioning system you should use this list to compare with what you already have so you can narrow down the areas you need to focus on.

Choosing workflow management software is a big deal, and changing that software is an even bigger deal. And while you as a business owner are on the hook for making the final decision, you shouldn't have to go through that process without help. You should lean on your trusted advisor for help with making the right choice. Your accountant is someone who should be able to bring an independent, fresh pair of eyes to the problem. If they're any good, they’ve probably worked through this process before.

Now before I wrap up I just want to mention the issue of price. In the past, when I’ve been talking with clients about selecting workflow management software, sometimes the very first question I get when we’re looking at an alternative is “how much does it cost”. Now that’s fair enough, cost is not irrelevant. But I want to make the point to you that your first consideration should be the cost of getting it wrong. A system that fails to efficiently deliver one or more of the basics on that list you made is going to cost you big time.  

Remember, your workflow management system is something you should be interacting with a lot. It’s a critical tool, and never something you should cheap-out on.

I hope you found all that useful. If you’re interested in adopting or switching you workflow management, feel free to give us a call. We'd love to help.

If you don’t have a plan for growth, you probably won't grow. On the other hand, it’s not impossible. 

You can be totally clueless about growing a business and sometimes it just happens anyway. 

But, normally that kind of unplanned  growth will only happen when two things are present – and those are when you've got plenty of spare capacity and there just happens to be plenty of demand. 

Now just for argument’s sake, let's say you don't have any kind of plan and you end up growing anyway.  What’s that likely to look like?

Well, it can look like two different things. Either, you’ll get very slow growth, which is generally unsatisfactory, or you’ll get uncontrolled explosive growth. 

So, If you haven't planned for growth and it just happens anyway, the results are going to be the same whether it's slow or explosive.  The only difference is that with explosive growth everything happens a lot faster. But in the end, you get the same issues whether it's fast or slow. 

Alright, what are these issues?

A big business is not like a smaller business except for being bigger. And being bigger does not necessarily mean being more complicated. Although we all know often it does mean being more complicated because there are more moving parts. One thing is always true though, when you get bigger, things change. They get different.

 And what happens when things get different? The answer is that you need to adapt. 

Let me tell you a story about a client I had a few years ago who grew without adapting. Spoiler alert - it doesn't end well.

 This bloke had a small business repairing trailers for freight companies. It was just him and one other guy. They turned over about $500,000 annually. Then he put in some tenders for some big jobs and suddenly he had $4M of work lined up. Within 18 months he was bankrupt and had lost his house. I was amazed that he even lasted that long. 

 Now let’s be clear.  There was nothing wrong with the tenders - and in fact there were decent healthy profit margins built in there. He didn’t get robbed.

 And when he first told me about these tenders I said to him, “we need to sit down and work out exactly all the changes you need to make to this business, so you don’t fall in a heap”. And his exact words to me were “don’t worry about it - we’ll sort it out as we go along”. And I said, “no you won’t, because when this thing gets started, you won’t have time”. But I couldn’t persuade him to invest the time upfront to avoid the misery afterwards.

 So, what went wrong? Well, virtually nothing that wasn’t totally predictable.

He went in undercapitalised.  We could have avoided that if we’d sorted his lines of credit before he began the contracts.

 Then he tried to make every decision himself. He suddenly had to employ twelve guys but none of them was a foreman. Chaos took over. The accounts were a mess. He couldn’t handle the accounts payable even though he had the cash to pay - so materials got cut off. Scheduling went out the window. Workflow went from “what do we do today?” to “how do we fix everything that went wrong yesterday?”

 It fell apart. And the old saying applied. “Failing to plan means planning to fail”. So, what can we learn from this?

 Well, we know that humans are psychologically very resistant to changing things that are already working well. But the problem is that when our businesses grow, we just try to do the same thing - but more of it. We stretch ourselves too thin. And we have this terrible tendency to ignore new problems and challenges that we haven’t seen before. We just mentally discount them because they’ve never been an issue in the past and our monkey brain tells us we should just ignore trivial things. But that’s why humans are smarter than monkeys, least many of us are. We have the ability to pl

One of the biggest things that ever happened to professional football was the introduction of the video camera. Because not only did these cameras mean that we could watch games in real time, it meant that coaches could record the players and see what worked and what didn’t. And when they knew what worked and didn’t, they could build strategies and training systems and end up with much better teams. And not only that, the players could watch themselves, which is something they had never been able to do before and they could see for themselves where they were going wrong and where they were going right.

Now, what's this got to do with your business? Well I'm not saying that you should walk around with a video camera all day and live stream yourself. What I am saying is that you should learn the lessons of the coaches and use the power of analysis to break through the roadblocks in your business and build yourself a winning team. 

So, how do you do this analysis? Well, there are a thousand different ways to do this sort of thing but I’m just going to focus on just one because it’s simple and effective and I know it works because I’ve done it many times myself.

Here’s what you do:

Get yourself a sample of a few recent sales invoices from jobs that you’ve done. It’s important that they’re recent so the details are still reasonably fresh in your mind. You don’t need a lot - five or six will do to start and make sure you have a variety of job types if that’s possible.

Now for each one of those jobs, ask yourself a series of simple questions and jot them down.

I’m not going to tell you all the quotations you need but they could include things like:

What was the gross profit margin on this job?

• Did we budget for time and materials on this job before we started?
• Was the job completed on time?
• Were there any problems on the job and were any of these predictable?
• What opportunities were there for winning extra work while we were on the job and were we successful at winning it.

Obviously this is not an exhaustive list, and you’ll find that the more questions you ask the more questions you’ll want to ask.

So do you see where I'm coming from? The point of the exercise is to look at the past to find patterns of where you went right and wrong.  Once you get to see those patterns clearly, it becomes much easier to build systems to change losses into wins.

This is basically the same system that top coaches use with their video cameras. And I’ll tell you something else that coaches do. They involve their teams in this whole process. So in addition to sitting in a room and looking at the footage, they sit down with the team and go through the whole thing with everyone involved.

There are two reasons they do this. Number one is that smart coaches realise that they don’t know everything. Doing this exercise with your team means that you're likely to get perspectives and ideas that you haven’t come up with yourself. More importantly though, the coaches realise that it’s the players that actually do the playing and they have to be the ones who understand the coaching strategy so they can make the changes that need to be made. Top coaches understand that most of the time, players don’t need to be told, they need to be persuaded.

So in your own business, get your team involved in this process. In particular, get them involved in the parts that affect them - like problems on site and customer satisfaction because that will get them engaged and all pointing in the same direction. 

Put aside some time to do this exercise. Do it in an afternoon and make it in the calendar during time when you won’t get interrupted. And if you’re getting your team involved - sometime beer can help - just sayin’

And one other thing - sometimes it can  help to get someone else involved to facilitate this proc

You might have heard of the business life cycle…. That’s the idea that businesses tend to begin as start-ups, then go through a growth period then move on into maturity and eventually the owners sell the business. Of course it doesn't always work this way. New business owners sometimes buy into an existing business and retiring business owners sometimes pass them onto the next generation. The fact of the matter is that at some point most businesses end up either being shut down or sold.  And for those that make the cut and end up getting sold, the owners are always laser-focused on maximising sale price.

But, regardless of how the final price is arrived at, let's talk about the things that you can do in practise to maximise the value of your business when it eventually does get sold.

Interestingly, the things that  you need to do to position your business for sale are almost exactly the same things that you need to do to maximise your profit and cash flow even when you’re not looking to sell in the immediate future.

So, when you’re looking to sell your business, the first thing you need to do is what you do when you sell anything else. You need to put yourself in the mind of the buyer. What is it that buyers want? This is actually not a difficult question. Just think about what you would want if you were buying a business for the first time. Let's list off a few things:

First of all, you would want a business that you can understand. All other things being equal, most people will not put down a pile of money on something they don’t understand. This means that the business needs to be well-organised and its processes need to be straightforward and properly documented. New business owners want to be focused on growth and profitability and cash flow right from the get-go, and they are absolutely not interested in spending a lot of time learning the bizarre intricacies of a complex business.

Secondly, buyers like to see all the components that they would expect to see in any modern business. They want to see a working productive marketing system, they want to see a smoothly running workflow management system and they want to see a clear pathway to grow the business without having to do a whole lot of preliminary work first. So in short, if they see your business as a fixer-upper, they’ll either want a big discount or they’ll walk away.

Now, so far we just talked about the things that are going to maximise your chances of selling your business to a qualified buyer. But now that we’ve got the buyers interested, let's look at the two key things that maximise the price. 

Both of these things relate to cash flow. Firstly, buyers are interested in the amount of cash flow that they take out of the business on a reliable, ongoing basis. This is called the free cash free cash flow of a business. Secondly, they’re interested in how well the business is positioned to grow that free cash flow into the future. So in short they’re thinking “what can I take out of the business now and what are my opportunities?”  So remember, because businesses are ultimately valued on free cash flow, anything you can do to improve that will have an effect on your business value. 

Now to wrap up, do you remember when I said that the things that  you need to do to position your business for sale are almost exactly the same things that you need to do to maximise your profit and cash flow even when you’re not looking to sell in the immediate future. Let this be your guiding light. One of the best ways to get your head into gear when you’re running your business is to run it as though you’re always positioning it for sale in the near future. 

If you just follow that one principle, you can’t go wrong.

Have you ever heard the phrase “don't reinvent the wheel?” And yet when we look at our own businesses, how many times do we see systems and processes and procedures that have been cobbled together from the ground up? Things like quoting templates, or websites put together by Wilbur the Website Wizard five years ago? Or marketing plans that got drawn up one afternoon but exist only on paper?

And the problem with the things that we built ourselves is that we become so attached to them that we honestly believe that they can never be replaced. They're like our babies  - and we don't throw our babies in the bin..

But what are the consequences of clinging to our old ways of doing things? It means that there are always going to be all these Newer, Better, Faster, More Effective ways of doing things out there but we're not doing them because we're welded to our own DIY systems, our babies. We're stuck in a psychological trap. But although we're not moving on, we can bet that our competitors are. And they're the ones reaping the rewards.

One of the most important decisions that you need to make when you’re running a business is pricing. This is true whether you’re running an electrical or HVAC business or in fact any other kind of business  - it doesn’t really matter. If you’re selling products or services, you have to put a price on them. That’s how it works.

 Pricing decisions can be really difficult. And that’s true whether you’re one bloke in a van with a box of tools or you’re running a gigantic corporation with hundreds of people. The problems are all basically the same.

Firstly, there is no guaranteed formula for determining the right price for the things you sell in any given situation. This is because it’s never possible to know all of the relevant information that should go into deciding the correct price of something. In particular, you can’t look inside the mind of your customer. You can’t see the value proposition for whatever you’re selling in exactly the same way as they do.

So, how do you go about solving this problem? Well, I’m not going to give you a crystal-clear answer on how to do it, because I just told you that there is no guaranteed formula. However, I can give you some tips on how not to do it, and I can also share some ideas about the things you should be doing to maximise your chances of getting the best price possible.

Hey bright Sparks, I'm David Thomson from Certus Group Accountants and you're listening to the Bright Sparks Podcast, the place where you get one actionable lesson each episode to help you build your profitable electrical or HVAC business.

Today, I'm going to be talking about changing gears. And I don't mean gears on your car. I mean gears in your business.

One of the most dangerous times for any business is during a period of growth. This can be especially true for an electrical business. The reason is that as your sales and revenue grow, all your systems have to grow as well.

The tricky thing is that all the other parts of the business have to grow at different rates. And to make matters worse, growth doesn't just mean getting bigger, it means change.