Many tradies say they are so busy working - and so happy with a simple business or sole practice - that they don't want or need a business plan.
But business experts say avoiding a plan means restricting the chance to grow.
Sue Hirst of business advisory firm CFO on Call puts it like this: “It’s like having a roadmap. If you have a Business Plan you have tangible goals and real methodology to achieve those goals. Real tasks and deadlines and a more structured approach to business helping you to get the results you want.”
With the help of a Business Plan, plasterer Rohan Simmons and his wife Luanne grew their Melbourne-based company South City Plaster from $200k to a $3.5million business that employs 23 people in less than five years. “A lot of tradies don’t really know about Business Plans as such. Having that document and having that vision and having a step by step process gives you focus. It’s our foundation,” says Luanne.
|A carpenter at work - did he have a business plan?
Credit: National Library of Australia
Not all Business Plans are created equal
There are two main types of Business Plan – the kind you write for yourself and the kind you write for other people. If you’re looking for additional financing, often the banks will ask to see a Business Plan. Templates for this kind of plan can be found online and there’s a lot of information on the government’s business.gov.au site. But the most important thing is to create a single-page document that reflects you and your vision for the future of your business that you can refer to regularly.
Decide on your priorities and set some boundaries. How many hours a week do you want to work? How many hours a week are you willing to spend on admin and how many on getting new clients? What is the furthest you are willing to travel to a job? What do you do well and what can you do better?
Back in 2000 Rohan’s plastering business consisted of himself, two apprentices and a van, with Luanne fitting the bookkeeping in around her full time job. Once they took the decision to draw up a Business Plan to take things up a notch, Rohan and Luanne needed to determine what goals were most important to them.
“At its most basic, our Business Plan looked at how to give us more time and more money. Putting time, team and money goals into our Business Plan was crucial for us to be able to grow. Using systems, leveraging myself as a plasterer and Luanne being in the office full-time were all key for us,” says Rohan.
According to Hirst, the key areas that all tradespeople need to consider are: “How you go about getting jobs at the right price? How you’re going to price jobs? And how to deliver the jobs so you come in within the quoted amount? It’s about driving revenue and controlling costs. It’s what sorts of jobs you want to target and labour is the biggest cost that can blow out. What are your plans to have adequate resources that are going to be as close to 100 per cent billable as possible?”
It pays to be different
One of the most common mistakes that tradies make is not targeting their business sufficiently. By not giving yourself a point of difference you effectively end up in competition with everyone who does the same trade as you. It’s a lesson that Rohan learned fairly early on.
“We wanted to get into some upmarket type of plastering and develop our niche. That was one of the things we learned. We developed our materials to hit the upmarket builders and that really seemed to work. At the time no one was really doing anything that stood out so by honing in on our niche we were able to pick up some quality builders and things started to move from there,” he says.
A big part of business planning involves determining who your market is and how you can reach them. According to Steve Smith, a Business Coach with Reality Consulting too few tradies focus on marketing and sales. “The most important thing you need to be focusing on in your plan is how to get enquiries that lead to quotes. Work out what a typical job would bring in. Then back track to find how many of these you would need a month. Then go further back to work out how many quotes you would need to do to win that business. And finally determine how many enquiries you would need to generate that many quotes. This will give you your target for all your efforts to get new business.”
Actions speak louder than words
Of course, a Business Plan is only as good as its implementation. According to Hirst, the biggest mistake tradies make with regard to their plan is: “Not implementing it. They write it and forget about it. A plan is manifested in a budget and needs to be looked at every week.”
The old saying that every business owner need to spend less time working in their business and more time working on their business has never been truer than it is for tradies. Finding the time to set aside for business planning might seem like an impossible task, but it will pay off. No one knows this better than Rohan.
“It’s about moving forwards and continually growing the business, and growing your mindset so that each time you get to a certain level, you need to step up and take your business on to the next step. We have a vision for the business and where we want to go and we break that down in to 90 day goals. So we look at our Business Plan on a fairly regular basis.”