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42 min view

How to forecast your cash flow (tutorial with Dan)




It started just after the day of business that joining us quite a few the atmosphere with you hit me will start on time. This is going to be purely technical decision. So there's virtually no slides to go through. Now we are going to make the spreadsheet available. At the end, what will it matter. There is a link to a Google doc and there's an Excel spreadsheet for you to light up and play with. So the important thing to remember. And this will go out in the email. So this is the legal disclaimer. I'm not a financial advisor. And this is not financial advice and you can't trust my word or opinion for your business decisions. You must run all of your financial decisions past your trusted financial advisor, which is normally your accountant. So this spreadsheet. You should run it past your accountant to base any of your future financial decisions on. So that's fine will be an email as well. So now that they sell the like, we can put that to one side. And participants are still coming. And so starts dating off like I was going to take it to 60. OK So 60 people were just doing it. And so we'll get going. So as always I'd like to the session is about cash flow and forecasting it. So it's going to be a numbers based tool that hopefully I can bring it to life a little bit for you. For those of you who don't know me. I always just like to talk for just one 1 minute about who I am. So I'm Dave Pollard founder of figure software. But on a promise since I was 17 and 7 plus since I was 22 and I been through one business full time was 24. It forced off and go into a big tech struggle and this. And ever since that day I've never gotten detectable since because I hate it. And I also went to another business between 27 and 29. I closed it one for stress reasons. And then I think I didn't get passed to people in their business, but the plumbing company got the 25 staff and two branches and I built that night years. And that was actually relatively easy. It's on rounds even though we went through some big recessions 2008 and I sold it because Vegas got too big and figures. Currently it's 45 staff and two in two countries with a teen stock. Also in Australia and the rest in New Zealand in customs whatever we're in the world. So to really hard businesses. And then two really good businesses. And so I got the hang of business a lot. So now should I take about half an hour to go through the mechanics of the spreadsheets and then it's going to be all. All questions and answers right. So really don't hesitate to ask. Lots and lots of questions. Your lines are muted just for distraction. And we will get we'll get into OK. OK So what I've done is I've built this spreadsheet for you guys to actually use in for to be as practical as possible. And so I'm like, I'm like high on an Excel spreadsheet. I'm no wizard but I'm certainly probably a little bit better than average. OK So what I've done is I've made things like he could play with these numbers here. This tape here. So in this tab here, I want you guys to edit these figures here Wright said this is going to see how many hours you are going to how you would trace people per day. So if you think about it, how many hours a day you was working. Realistically right. And then how many hours can you charge the property owner. It's a very important thing. So if you've been on Fergus for a long time, those numbers are in the staff overview report. So you go to that. This will work out automatically this percentage when your business is humming. This needs to be as close to 90% as possible right. So we would 92% never. You need BP to starting out not having got your business for any change 80% to 85% is probably kind of real estate. If you're in Australia justice to 10% is inspecting the scene. Now this is here. These are just place holder values Jared would use this will be seen to run at the end of the session. I agree with top link and it is in a CSV spreadsheet we load up. So please don't worry about that. This will definitely be seen to you know trouble now. I'm going to show you a basic thing. If you've never use an Excel spreadsheet or a drive spreadsheet. It's got a couple of little tricks. One of them is you can click in the numbers things like here. And this highlight that he'll grow. So you let you lead click in a number. And then if you right click, you get a whole lot of options. And one of these is to insert a row above or below. We can go into it. So if you've got more staff members. You can just sit more rows and that's fine. So what you can do is just put your staff names in here. And then what you pay them what you charge out. So going to show you something. So if you keep an eye keep an eye keep a watchful eye on this. And this. I'm going to just it just this like the 0 and 0. And it's adjusted all these figures like to 95. So this is all linked. So you can tightly edit all of these fields. So it is as you see fit. I won't even go my go eat it freely same for these two minute it did it go. So let those the ones I want you to eat it. OK what we'll end up with is this page, but we'll come to this at the end. This is the. This is the bit. We're also all sort of Metasploit. So what I want you to do next is from your zero or MYOB is print off what's called your profit and loss report for the last 12 months. Right now in that I want you to copy all the costs into these sort of areas and put them into here. Right But really importantly, I want you to do stuff like ICC so in New Zealand, we have ICC Accident Compensation corporation in Australia. What would worksafe I'm not quite sure now. In New Zealand. It's really annoying because ICC builds us our ICC normally into January. And it can be quite a big deal because it covers the whole 12 months. Now that is really irritating that the ICC does that. So what I want you to do is if you have a big bill that comes in once a month like I sites 20 grand I want you to divide it by 12 and put that amount in per month that spread out per month because ICC is actually accumulated every month. They only build once a year. So therefore, you want to be thinking, well, what's my ICC cost every month. And based on your last year's earnings you can work it out pretty accurately. It's the same with insurances. We pay them lump sum but they last 12 months. So in any further that that cost is incurred every month that you pay it every year. But you want to be earning that money every month and putting it aside in a bank account somebody is due you've got the money due. So you want to be thinking, what are my overheads every month coming out. And the best way to predict that is looking at your previous year's overheat components. Now, the reason I put fixed overheats is because these things you have no control over. You have to pay them every month. Right So that's why it isn't fixed overheads. If he's got more fixed overheads left click to highlight the entire area, then right click and you can add a row. And can add another. You can add another causton whatever encourage those not to put too many Rosen. So if you've got a lot of rows around health and safety because you've got uniforms and boots just put it as one it goes up separately and put them in as one figure in sign for your vehicle costs trying to put every little line item in your eye the heat gets too overwhelming. Because what I want and what I want you to do is like, for example, in your variable overheads once you've got to look at your spend per month and sort of groups and go, I think this month. I can spend this much on advertising, for example December, January. You'd want to really cut your cable Edwards if you're doing advertising right. And so by having a great deal of variable overheats you can now see what you can cut. But you also want to be thinking, what am I going to be spending every month. And so I think motor vehicle costs are a really good one right. Because you've got warranting and servicing kind of infrequently. Like you don't know when you're going to get breakdowns. But you do know that over the course of 12 months every vehicle is going to have some servicing requirements. And based on last year's figures you can divide that by 12 and edit in per month. So that you've got some have some budget to allow for vehicle maintenance in coming up. And so for example, health and safety I've put this one in here because you know, all year, you guys are buying boots and overalls and all sorts from the safety shops. And you might have other software you're using whatever it is that you editable up. So you just at least have some budget in every month to spend on health and safety rather than this just a random purchase. And so what you will then get to see then is it all adding up to what you've budgeted expenses adds. So there's the big one here. You want to see an Roi 32. You want to try and have your overhead spread as evenly as possible per month over the course of 12 months. As you can. Because I know that the cost something like your ITC will fall in one month to get that. But you won't try and spread that cost out over 12 months and start knowing, OK, this month of June this much. How much time to start putting aside for these bills that are coming now. This is still quite a very simple cash flow forecasting I decided not to go too hard out and I haven't edited all the bank accounts that you should be shuffling money into because I would get to 20 pages until overwhelming and sometimes a lot of spreadsheets only make sense if you're building yourself. So I have kept it relatively lightweight but hopefully it's enough for you all to start getting an understanding of or he could actually reasonably straightforward to predict my cash flow and expenses coming up for the next 12 months. So hopefully this. Please feel free to ask questions as we go right. I don't I don't believe anyone is now 120 of us here. So just ask the questions as we go. And I'll go back and slow down because it won't take all that long to go through this. It really won't Daniel. We'll see to said at the end at the end of this. We'll see that all out to you guys. So I did print occupy now just to recap this page just as this tape was called overheats differently print occupation out from zero because it was European art. We'll be breaking down over 12 months definitely copy it as close as possible educate from 0 into those into those rows and then divide those costs by 12. OK, now here's another trick. I don't know if you know about Accellion people probably very similar, by the way, I can put a figure in here. So my get three say 350. You just see row 37. Just put a rally. 350 see the little square just here. I can drag that square across and it will copy that figure right through Jared wood offer salaries office salaries are overhead. See you see what this does is this allows you, if you got 18,000 here I put 1515 100 and just drag it across. So I'm actually into it 12 times it makes it very simple to do a switching now on every page where it's important. I put this thing in here. What it means is do not add rows like this because all of these are added up is a thing you can do here in spreadsheets where you go, you can highlight and is a totals button put some and by doing that, that adds up all that adds up all those numbers in that column to give me this title here. Right So he goes eight and more rows here. It's going to update this figure, which is what we want. So I'm so please follow this. Only at rising cost above this line. So I'm give you a total expenses per year, which should match your zero figures very closely. But it's now broken down into the 12 months by Casey casein you over hips per month that are coming in now what I've also done is I've copied the percentage your Jesus tell you from the front page. And this is the GST that you would have paid on the overheats. So what is very, very critical and all spreadsheets. This one. This one is built on excluding Jace tape. Right it's just like when you're working at the square area of A in the area of a square you must always convert your measurements into the same units. Millimeters or meters, whatever. That's all must be the same units. The same with the spreadsheet. This spreadsheet is based on all your figures excluding GST you're paying Ella's genially going to show you figures excluding GST her do just that what she. Otherwise, the figures get 15% down, which is all a lot. So Christian joy. Yes If you've employed extra people then last year. This in aid an additional employee and say you what you would do. You signed back will cost you up your vocal costs that all the numbers say it was 100,000 people to be able and you had five staff members. It's 20 grand Prix staffing, which are your vehicles. So therefore, you would allow another 20 grand in costs for that vehicle for the stopping the insane with all your health and safety and that is the next level of health and safety is time. That's right. Budgeting aside to have working as a percentage of your overheads how much of it goes to having an employee and then having that budget into your overhead model. So every time you put employee on you add in the extra costs associated with that employee. And so that's the stuff I didn't want to model. I didn't want to make the spreadsheet too complicated. What I'm hoping to do is get your minds thinking, oh, this is quite simple. And then there are lots of problems with this because it's so simple. But hopefully once you get all you can see what's wrong or I'll edit in. But if you edit yourself. You know this works for you and your situation. So is Joe deliberately Lipson a bit simple and quick is that you should pick up and absolutely just add an extra cost for extra employees OK. So So the GST I've worked out here this. This is linked to that France places numbers page. If you're in Australia make that team st. This will adjust to 10% So this is the GST that you have paid on your overheads. That's a good question. By Tom. Any tips on new companies that have expanded in the last six months that do not have the last 12 months. Now That's a really good question. That's really valid. If this is the case, then it's probably worth sitting down with your accountant for about an hour and asking them to go through other businesses that are comparable what they had likely overheads are because it's the only way you can get a good grip on it, and saying that even after one month of being in business, your overhead sites would change all that much, you still go the same line items. It's up to you to stop budgeting. How much you want to spend on health and safety. How much money spent on advertising per employee that comes in. That's what this is designed to do. So opposite a case is a really interesting question someone so had Jared's ask me do would off a salary is overheat or cost of goods. OK So it's very easy, very easy to explain that anything that you can charge the customer for is a cost of goods sold if you can't charge the customer for it. It's an overhead. It's as simple as that. So if you always leave right there on your forehead that simple explanation if you can't charge the customer for it. It's noted if you can charge the customer for it as the cost of goods sold or used. I have not got any salaries in this model. I haven't got any concrete and Jared, you're right. I didn't put any of salaries. This is the model. And they show you how it works. So I would highlight to rise and go and sit to above and I'll go offer salaries while I like. And now I could put an offer salaries like that. So that's exactly what this species is on to do. Now Eric he's asked this a solid question not with bank loans or vehicle accidents do these get under fixed costs. Believe it or not. No The reason for this is a complicated. You take a sip of water to explain this. I When you have a loan from a bank or wherever there's two components to this because you have bought an asset. So whether you buy a house or with $1,000 or a then that's online. The principle capital repayments of that loan are not classed as tax deductible. They are therefore. Every $1,000 is actually, I think there's a 500 all in it for local states. If you buy 1,000 little or pay $1,000 off on a vehicle that's classes profit leaving the business. And you actually have to pay tax on net profit. Now what the tax department allows you to do is what's called depreciation. So for example, I think vehicles might depreciated 15% or 20% a year. So let's say that van was worth $10,000 and you're paying it off at $1,000 a year. Arguments like every year that $1,000 you have to pay about. You pay an effective tax rate of 30% is generally what the government's trying to keep from you. So for the sake of this argument. Let's just say this is an effective tax rate of about 30% So every $1,000 you spend on assets with it without paying a loan or buying a two the tax department classifies that as profit leaving the business all profit leaving the business is taxable. So you will pay about $300 tax on that exit. What the tax apartment allows you to do is claim back that costs over time on the thing called depreciation to a percentage. So let's say that $10,000 van depreciates at 20% a year. So that vein is now worth. So now with $8,000 you can claim that depreciated value back off the tax you just paid and the wife kind of designed the system to sort of work out over time span is it to sort of balance each other out, to be honest. And it always works. And a bit cost neutral over the three to five year period. So they get the initial tax upfront and then over the course of three to five years, you get it all back through depreciation you into zero the because of the tax man the number one concern is cash flow to redistribute the income through the social system. Right So you cannot put any loan repayments into your into the spreadsheet because it's not quite accurate if you're wanting it for cash flow. Because I've actually built this more from a GST tax compliance actually making me think actually Eric. Yeah deflation I think actually, I bought this from a GST tax point of view. He's got a good point. If you actually paying of HP you want to know how much repayments you've got going on for your vehicles. All it's a little just as critical that I'm so that you're right. The president's remains a side note when you assets in stuffer taxable activity. Good Yes. Good question. I'll get that for you. Can anyone else. Right what are people now. OK, so this is over hips. Let's go to the next page. Now So same of the same for you materials and contractors. So what I want. I split this into two parts here. You can put in the amount that you've bought from your plumbing world or eligible wholesalers. So this is what you saw, what you sold them for excluding GST which you can get from your pay now. I would like it entered in per month. Now, the reason for that is amazing help workload. Depending on your industry is normally quite seasonal. So for example roofers but also be super busy during summer and then during winter, they find it much harder. And so the materials are a good indicator of the business. Of course around Easter we're all going to have a bit of a lull because we have rifles and we've written off from Easter and school holidays. They will always have an impact on your ability to do work. So the seasonality of materials are quite accurate normally year on year. Come here. It's quite helpful. And so if you can put in here. What you sold your materials for excluding GST is always. And then on this line here should mirror. This line here. What it costs you to buy. Now, the reason I want this is because I want to better get this Cannell I want to work out what your profit on losses every month from your materials based on last year, because on the law of roundabouts the highs and the lows it kind of balances itself out over the year. So I know that every year is different in my head. You might have had a really good October. It's not guaranteed, but you might have a really good might. And on the law of averages. It kind of always seems to be the case is always one good month and one really bad month and into an average months and some good average is the law of averages is the law of averages for a reason, right. But definitely left some sphere rose here for more more supplies. But if we put those in here. And once again, because in effect, you paid GST on the materials you bought and you charge GST on the material that you sold. And so therefore, I can just work out the GST on the profit or loss every month going forward. And that's the GST that you will have collected and owed the taxman on materials on this line here. So that will just work out automatically. So once again, just to be really clear. You can lift click around right click and you can add some reason for you more suppliers. And now to just if it doesn't, it will end up is just what you do. You just drag down to arrive. Well, it took until scored some and that will end up in the whole spreadsheet will work though. Try not to Ed and do not don't Ed and follow the yellow. So this one here. You shouldn't need to do too much fiddling and this is corner wide. Right great it out a little bit. So these here are just all linked to the front page. Right So they're all linked to the front page. But what I've ended up here. What I've ended up here is the interesting bit what I've what I've gone through has gone through the calendar and put in the weekends in the step days for when we can't work of Easter and Christmas holidays. And I made a guess for your public holiday. For the paid holidays. I look when it works out because it's important to remember the you put to pay the tradesmen for all those holidays don't work. But you can pay them that. And it has quite a big impact on your costs per month especially around December, January. When we go back to a summary page, you'll see how frightening that actually it actually gets what you pay them versus what they can charge for it. So look at this. So this is Jane Jan right. So this is what you paid them and wages right for the state pays and people can we take a good week's holiday. But this is only the money they bought in. So this is kind of accurate data. And that's frightening. So that means he means in full like in January. It's kind of a waste of time being a business for that month. It's terrible. What can you do that. There is a little bit of people on holidays and this is the benefit of having a good spreadsheet. So you go holy heck I expect to lose money on paper in January. He's a good question. By Shane. What if he don't know the materials sold for value e.g. we have a huge amount of quote wood. So materials don't always have a specific sale price. That's true. Shane if you had been on Fergus for a long time. Well, if you look into your she has really good question actually. OK, let me take my time. So when we were doing quote claims when we did the quite claim we would break up the claim into materials and labor. So that when it went into zero it would be counted. We would head the two line items of the China account case for the value of labor. So that the material sold on the quota jobs so that we can get some breakdown of what was going on in that month. Because you don't have that you still that this will still work Shane because you'll just have to do it the old fashioned way of entering the materials per month that you've bought because it should be in the and then if your discrepancy if we labor is so far out from what it could be that's because your hours going so far over that you're not able to recoup what you could for your labor. That's complicated. You may have to email me directly and I'll call you and talk you through it. Because if you do a lot of quotes that you don't do you claims correctly, they can restart a lot of figures up. So in Fergus there is a work in progress report that we want. I'm not try to bring it up and show you guys a lot of quoted work is really helpful to work out what quota jobs. We were you making or losing a lot of and quite a work. We've got. We have a specific report that's opening that up actually and we'll start writing it now, but you signed it. Do you feel free to email and when kois directly. I hope this page makes sense. So do you split your supplies into what you sold your stuff for right. I try to put headings we think and also put in him what you bought stuff for. And the reason I want that is I want to get a profit and loss for you material expectation every month. And that allows me to work out. Also your GST component GI Joe I asked about the apprentices on block courses that they have to block courses. I said, what you can do. Joe is on the hours of labor. Yes, you can. Go through and eat. These individual monthly figures for them to reflect the loss of earnings. If you are actually, if we were doing this technically really, really accurately, we would actually make a separate page for each employee. Right I didn't want to get this thing. So overloaded but tell me what you would do is you would have one of these sheets, put every employee and as you would say you would then put the block courses in, for those particular time slots that there are a way to get the thing as absolutely accurately possible as you want. I just want to make this that complicated. Once you know how to link sheets. It's not too bad. But yes a gigantic accretion is that next level of detail. You should be going through making a sheet for every employee and putting in the block courses to get it just 100% assuming that GST. So the states just link. This is just linking up the GST charge materials, the GST charged on labor, which gives me a total GST collected right. This is the GST I paid on overheads heavily were paying a lot more. And then this is the GST. The GST that you know oh the Idi OK. So you can say that also although it's quite simply and now what this does is this brings me to the Summary page of the AMA'S question after this. So these figures are linked to all the other figures in the speech sheet. So hopefully labor income makes sense, right. That's linked to the latest spreadsheet in the wages paid. And so is this is the gross labor profit you can expect from that. Right So you can see, January is going to be a shocker. You can see that February, march you this month April for Easter makes sense, right. Since now a bit of a shocker same for you material. So you can see you can see the January strength by because of the materials on the net. That's right. And you can say that last year for whatever reason you lost Soleimani was a bad job you didn't do invoicing not quite sure. I just trying to keep this a little bit real. But then what you can start to see is what is your gross profit expectation you can expect in every month and what are your overhead, so you can expect coming in every single month. Right because that's the big deal right, Robert rather than getting these huge overheads in general as ITC you vehicles. One month with that lumpy, you said you are going well. I pay every month. I'm expecting $12,700 of overheads every month. And if I stick to that budget. I know that all of my business will be OK. Long as my mean tradespeople as my tradespeople are doing this long we who try to all are doing this whatever it is you set your tradespeople to do. They must do this right. They must do those alleys because if they don't do these hours, then your whole budget forecasting falls over because you're only making money when the guys guys are working right. You know making money, materials from the cost of putting it in. So your whole spreadsheet is your whole business starts relying on these two figures and you must you must at all costs get you all tradespeople to do these hours, five days a week, whatever it is you see this to be. Now I think the rest of your spreadsheet. So the reason I put any profit here. This is the net profit you can budget and to get in every month for your business. Now based on the net profit I got two things. This is the GST. You can style this GST figures so far out because the numbers aren't real. There's not enough overheads in this region to the more I go in. The more accurate in the list your GST will be. So don't worry too much about the GST figure. But what I would like to know is I like and 0 every week, how much money I toss out putting aside for GST and I also started we used to do a monthly payroll tax payment to the ADF at about 20% effective tax rate. So I was never getting too far behind my Texas was always making voluntary tax payments. So when you have a little twitchy this, you can start going. OK So every month is my GST they'll likely and this is my protect their will. That's not likely to come in say. This is not the first stage of a cash flow forecasting in a. There's a much more complicated one, which I won't share at this stage because there's so many numbers that can get overwhelming. But what it starts doing is comparing what your actions are to what you had forecasted because what you need to start doing is start running like this. Make sure you got two screens in your office and you have this spreadsheet up at the start of the year that you'd budgeted on. And then you start showing what's actually going on in 0 because if you think about it, the trick is if you've built this pretty accurately based on last year's figures in the hours, which will give a pretty accurate and it's wildly different than the reality. Why is that. Because this this this starts becoming the heart of the business. Why if the business is exceeding the spreadsheet great. But if it's far behind the expectations why. And generally speaking, it's for these two reasons. Only the first reason is this, you would trace people aren't working the hours that you had budgeted for and the second one is that the hours on your quoted jobs y out. And that is generally the two reasons go. I got myself, which kind of makes sense, right. How many quota jobs come in. Well, for businesses. Very, very short, because they're not managed well. So this is why the people won't be working the hours. But they're not able to charge the hours because they've got a fixed cap labor costs in the quiet. And that's what these figures can get well out. And so that's what have to keep an eye on the work in progress quoted report or bring it up in a few seconds, you must keep an eye on if you do a lot of quoted would keep a check on how well your hours on your quotes did versus what you had allowed for rights and questions from Adam high at the end. If you cannot find the difference cost of materials i.e. buy and sell can you work with like this markup. And I think that must mean, it's not coded correctly in your zero. That doesn't make too much seats could good because zero Yeah. Well, I mean, I guess might be for both. I mean, typically plumbers as marking up goods 30, 40 60% on average because overheads are 30% So 8% market would be horrendous. So you'd have to recode you have to talk to your account as to why you can't find those figures. Maybe it's the way that it's terribly being seen to 0 from focus when you're doing a part climb. You know you're not making the claim to components. So the title should be split into a labor component and a material component combined is one line. So the customer can't see it, but they can package knows how much they're quite as labor material. So you can start to get an accurate understanding. Well, this reporting purpose as surmises with the Materials tab kind of similar to the quiting question. But if you do a low fixed price e.g. solar installation how is the best way to break it down when the site makes materials. Right So you should be using the actual you when you do it. Yes interesting. OK It's a light moment for you. Let me bring let me bring up a quick little appreciates rod. This is not this. This would work for this is more for electricians, plumbers than a builder. The spreadsheet is more, just log into the second lot. I'm trying to log into a demo figures account. And I want to show you something we're doing an invoice and this is just the demo sort site not actual job here. This is Ezra Klein. So later. One, just might guess I will make it 4,000 you know make it 7,500 all very important that this has changed the labor sales materials. 1000 2000. Now we can take those. And then I believe that. Where is the idea I want online. I previewed it. So when the captain said it's very important. Now So when the customer sees that they see the one playing for 12,500 but when 0 gets it their claim is now split into labor and materials because it's important because without that, you can actually get an accurate understanding of what your quite claims split into. So I think that we should answer some lines question. I think been chargeable hours you should be aiming for 90% That is the ultimate I'm paid award. How would you approach your wages if you have different charge out rates also. Peter wells you're just going to have to make the law of averages for that one. If you just make an assumption that if you think 20% you'll works at the higher rate, then you can adjust your idea rate by 20% If it's more than that, then you'd have to really break it down. Now just do the law of averages because Yeah. Otherwise, you get it will get too complicated to try to work it out. Eric Jacobson I can with you if you just hold the lines, it doesn't matter as long as you put the bracket into labor and materials. It doesn't matter. And not how do you select it when you're revising your quotes. I don't quite understand that one Martin when you budget quite you should be building you quite frankly, the same materials and labor. And then combining them into one line or hiding them. You should be doing exactly the same thing as you're quoting fixed rates. That's incorrect. And I would smack your hand at if that's the way you're quoting. Don't just quote on fixed rates. But that's the way it works. So let's not get into that. I won't I won't get into that for now. OK, now that's good. That's good. Now Nelson it's sort of really is no question time. So you can just ask why. And it is time to just now ask all you ask all your questions. And if you need specific follow up on him to call you guys all sort of individually. And so talk you through it. But to really go through it to answer the nitty the nitty gritty questions. Because if you're being really good. You are sliced up like this every month to reflect reality, especially in times of cowards post recession. The big thing you want to be keeping a handle on is obviously your overheads because if you're budgeting to spend this much on health and safety or range or whatever. And you just can't work the hours because the workers aren't there because you can look at your budget, you can now see well ahead forecasts of just being x amount on health and safety in this month. I'd forecasted to have this much on read if you just can't get the hours you go. Well, I've just got to start cutting costs. I've got a lick of marine my veins or whatever. You've just got to start looking at your numbers and then updating updating them every month as they come in. And if it's new for you. It's timely with getting a bookkeeper onboard who is used to doing this day in, day out. And because it's an Excel spreadsheet model. It's not hard to update. But when it's updated you can sit down and go and because it's broken down. This is the really, this is the big one right. Look, I know that once right overheads because this is the one that you really want to get a handle on going kick. These are my fixed costs every month. And this is what's going to come in over the next year. Can I afford it, and then this is allowing you to be into the land of hard choices right. Looking at your habits and going. What can I or can I keep insight based on these numbers here. It's going to be really, really, really honest with your sales, especially this coming week when we get back to work because what if this is we just put numbers in to show how it works right. What if you can only work five hours a day and you've got to pay it in five hours a day. Mr. this go to us. This guy to our summary page and you got actually well this business actually still like. So this business is OK. One would say if this business can keep working. So if we don't really worry about too much right. So this business systems are still keeps on tracking and it's the best to be the period having a model is that you get the plug it all in and you just get to see what's going on. So, if the model works, then the model works Yeah Yep. Great, you might you would just make less net profit. But does that really matter. Well no longer less a board. It's like downhill. You ask, how did building code white somebody please. Is it Denison. Yes, it would be. You need it. You just put it in as a income line line item is other income. Right let me bring up a just texted me a minute will I bring a work in progress report quotes. So this must be with me sliding now. Can you see I can. OK So underreport we've got a web Report right. It takes a little bit to load. So you do like that. And then you'll see once it's loaded up here. You've got it isn't quite. Just go quite and submit we'll take a minute or so to load. Now the date is a date right. She is going back. Let me just go back get back to the 1st of March. You see it finished quite yet. So name is going to divide what we're trying to keep an eye on is price to ls actually ls because they say things will be in these rows if there's any completed quotes in here because this is how you know what's going on. Still lighting this accessing all data in the database, it's a big seat. So it's not the data. It's got to pull some big data out to try and find it is what takes you all analyze it. Just be patient telling you got inside. This is what you don't want to see. But this is the reality. Now looks classic O139 3 actual 562 194 458 135 to. I mean health. And I see this every day quite a job. So always losing money. So I mean, looking at various scrubbing in progress right. So this report is really, really interesting is of cost progress little filter button here. And you can just see all the work you do. Let's look at that. Notice the shocker right. And so this is what this report is really handy for me to work out are my quota jobs and even making money. And for those of you who are sophisticated you can then download as a CSV there's a whole lot more columns. And you can really start drilling into the job too. While you quite jobs always go ahead. But I would Gerri say most companies do not manage to bring their quota jobs in on time or on budget. And that's kind of why now I go asked a good question. David RCC I quote on a fixed price should I work at amended materials. Plus labor. Yes So this would have to be one I might like single biggest one I've got many gripes but this is right up there with one of my annoying gripes that people do. Just because the fixed rates is like $900 well, who cares. Have you worked it out accurately to what you a fixture right. Right should be. So what you do in Fergus is you have to go build delicious pick on. This is favorites. Let's just pick on what is on the ballot right and still made to an idea. So in your hot water someone that you've absolutely got to price out all your materials, and you can second some labor by on this one right to my second term labor sales go. So I've now got the labor costs and the materials costs all in the cost of that quote. That is $17.95. Right now if the builder tells you. I'm going to pay 2,100 for it. Well, you get to decide if you want to work for 2,100 or if he says, I'm only going to pay you $900 a fixture and you ate it up and it's costing you 1,000. Why would you do it. Just because the market's charging it doesn't mean you can do it for that. And the only way you can know if the fixture rights that are out in the markets justify those if you actually build them yourselves and have something, have a benchmark that you're working to I just find it. I find it incredible that people just accept a fixture right. And haven't built their own favorites to understand can they actually make money out of it. So it's hard to be so hard. David But honestly on all of you if any of you doing fixed your rights and haven't built your own a terrorism kit say whatever you will. Mad in this break time plays spin your effort at learning favorites and build them and understanding you can work for those fixed right now Fergus has the ability to override that as a fixture price. You can see this price you can see it's a 2,200 and it will override the sale price. But at least you will nail no with the bet costing the hours. Could you actually do that job for that amount. And what the figures is to tell you this, but please do not do any work on a fixed price unless you've built it yourself with your labor and Material components. Edit and so you can not in LP this, you can. You can combine your super supply material cost into one line if you wish. I don't mind. I just like knowing myself on a handy to know how much. I'm spending on plumbing this is drainage basins roofing this is dig is still stuff like that. But just do as you say. That being this one Jordan rock music communicate everything white suddenly in kind of my text. That's correct. Yes because you income other, that you're not charging GST on this. That's correct GST income but no GST type Duncan. All right. Big question claims a flood of clothes works into labor material takes in figures and seem like 50% for instance nice when you seen the claim to say whatever you built in Fergus do it as a percentage claim on the quote, We will just focus. We've just seen it into zero as a material code. If you're doing a 50% claim in Fergus you'll exit it to line items 1 for materials one for like one for Labour. Make sure you got the right tag at the lectern make sure this tag here is coded correctly. And then combined to one look one item or hide. So that in 0, you get the two line items. That's critical to get the accurate numbers. Shane I also quote on fixed price shine. I understand the market. So let me be really clear. I hate fixed unit pricing with a passion. All it is designed to do is to drive the market down. What traders can charge. That's the game that we play. And it's fine. Now there's a thing I love, which is oh another one of my statements. It's your game. It's your rules. What you do not have to play their game of fixture price writes you don't buy it. If you choose to play it what to do. So on your own rules by knowing what the hell you expected costs. So I mean, I mean, we're in the tendering game. I don't know how many of you have done teenagers or apartment blocks right. So when they built apartment blocks. So they're building two or three sets of townhouses and a lot after lot right. And you know the 10 of us. And you can quite Tina. So say that the plumbing teen and might be, say 100 for greens for the labor materials and fixtures to supply food for apartments. Right you tend to know if you don't win the tender. That's fine. But what the contracting can do is they send you the winning team to price all the plumbing. Now, the reason they do that is because they invite you to quote, the next tender for the next set of apartments and you under the market price was 104,000 and so if you want the work. You've got to come in. So 102,000 because they're trying to drive you down. Now, that's fine because the way what business has tried to do is encourage you to improve your efficiency. So you go well. OK Not too green of the price. It's all got to come to my later. So how can I do it faster. I can move up my be the drill bit of drill bits I can do all these little things to try and save this money. Maybe it's how I can do it. And this tightly held capital market is place to work right. It's supposed to put the right pressures on. So you look for ways of being innovative to increase your efficiency. That's fine. Now if you totally understand it and you're happy to play that game and you need to invest in systems and tools and training and technology to forever drive down your luck your labour and material requirements go for it. But if you don't fully understand that game. Then don't play it. So what you must do you must absolutely work out your own material your favourites for the components for what the contract is asking you to work for because the advice on your cost structure you're good to go. I kind of fought man. And if you look at everyone's quite work and progress. But look at your own. You'll find it nearly all your quotes will lose money just the way it goes because the real world is never as clear cut as the pit it will be sit down and work it out on paper. So yeah, I hate fixture rates. Well, I quite fixed rates. Yes but only if I worked there and with you. I can make money on it. That's my little rant either. Thank you for listening. Tom can I run through the business activity report and see how it compares to the spreadsheet. Not in this recent you from the and your comedy annual second video going to be something we're going to have forgotten what the hour is up. So I suppose it's time for last minute questions. I can't actually read the mind like I was going to show you something. How many of you look at your staff overview and Fergus so reports staff overview that this data is all dividends it's going to be absolutely rubbish. Data is my daughter here. It's even less helpful than crapped out once and crept up next. So what does. We'll show you. Isn't this in Vegas right. So I got good reports guy stuff either view. This will give you a figure here of your procedures of Alice charged. So this will leave you in no doubt of what your business is performing like. And so based on this number here on plants. These numbers here. You can't expect this to be any different in any better than that right. So I want this percentage figure should reflect your reality. Oh, that's right. I was going to bring up a little document just stay on the line. And I think some you'll find this quite interesting, actually not too long now. I'll show you in one slide where most trade businesses lose money on quite what seasonal actually OK. So this is why my straight businesses lose money on quoted work sites I quoted bother me. I wrote new house. I was something. Yeah say it's 100 Al quoted job right. This is by and large, the most massive it is. Well, when I said sorry to be less than real here right. This is what happens right. Simplicity the goal is right the supply is getting materials mucking around driving in rush hour traffic. And so sort of between 9 9:15 they sort of get a site call then in the afternoon, you call off to another job for a tourism agent because you're a good customer and you've got to fix the kitchen tap or wait master whatever. And then they stop working not cook. But this is the issue disks for here. This was made through and through. I mean, I white always be at the workshop, I got the apprentice pickup tools pick up materials drive to site maybe buy 715 7:30 meet the tradesperson on site and the materials would come from the merchants. The big delivery would come in the morning by 10:00 and morning and into trays are site all day working. I just was talking to a fellow plumber designer. He's paying the cost of the delivery fee for the boys. So they can stay on site and keep working. So if they get their lunch delivered he'll pay the $5 the fee because it's cheaper than the boys going off site for half an hour getting lunch. Come back and mucking around. Right you think about paying them 30, 40 bucks. Now, you don't want them off site. Right So if you're a super organized, which is if it right there on site working for nine hours rather than 5 and 1/2 hours right then this is the result. So when you organize your bank through your hand real is irrelevant nice job, my money. But if you muck around like most of us do. It took 18 days and the job lost money. And when I got through that court report nearly every single business, you can just see the same pattern over and over and over again. And as for those very reasons when we quit. We quit for a perfect world. And then the reality is really close to what I like. So if you want to like if you want a working fix to gain pricing or perfect world, then your business has to be at such a level of operational efficiency and organization. It's hard to believe because it means. You tell the guys. Yep you're on site s.a.t. matures coming. You've got 10 hours to complete this work. Get it done. Right But the ability to get a business to operate is really hot. Not another spreadsheet that shows 192 percent is the most effective charge out right. That's achievable to get over the long term. I can see in this stuff to we can hold on another training session on it. There is one other slot I want to show you which ones materials, which is an opener. So this is once again for the favorites. For Shane Dane and this is also, if you're going to if you're going to play the fixed price game then this is a real tension. Right So look at the pale points quoted. 23 right. $9 seldom even living dollar is a fixed price. You making no money right. Low margin, which is fine. However Right you still ahead allowed it sort a small profit margin of $59 on that line right. Still worth it sits still. But the reality is if you're disorganized you allow the transfer you've got, you know the people that go to Site to buy stuff. And because stuff is sold in bags 18 boxes a team. They buy three boxes and now look what happens the cost has exceeded the sale price and you say. But those materials are in the band. And I can use them other job and I'll say here really where are they so what happens on every single quote a job on every single line item that they either buy on every single day. Where does all that material guy get. It gets left hand side, it gets used on other jobs does get charged for it gets taken for private jobs. It disappears into vans and workshops and it just disappears. So it's theoretically you have the materials to use. And other jobs are practically most of it goes who knows where it ends up just sits and disappears. So if this is the other reason why created jobs lose money is that you were just organized on the labor being organized to get the site and cranking out a full nine hours on site and the businesses just organized it over buying materials and making sure the credits come in. So most quite so lost before they've even begun because most businesses don't have the operational discipline to bring quotes in on time and on budget. That might sound harsh and brutal. But that's reality if you also try to. Oh good. It's just you like it only works up fine. But if you've got three full staff quotes these money because you play. So disciplined to make them work. So that's getting off the cash flow. But that's very important to go there because that is why the catch is often the discrepancy between on paper to make this money, but in reality, I'm not. And because the reality is it's the courts jobs just drag the whole business down dealing with the payment is incumbent to fight this correct. That's correct. Oh, Yeah because I do have the ability to run a workshop and vain inventory. Now with our is up by. So just a cyst to summarize I'm not a financial advisor. So please do you go see your accountant. This is an entry level cash flow forecasting that when you fill out. It should give you some really interesting insights into what's going on in your business. The really interesting thing is when you fill the library out around theoretically, what you should be doing. And you put out the material. So what you bought and sold for. And this will show you a theoretical gross profit, you're making. And you can compare that to your actual profit I'll bet you're going to find out this. These are wild difference between the two. The reason for that is because if you look at your work in progress report and figures you'll see that most it quoted jobs lost money. And that's the place to look. The other place to check is that your staff either you charge out right. What is your actual percentage charge right of your staff. Those are your two big labels. Labels to check. So check those out. I would absolutely love to get some feedback from all of you because I super interesting right. Feel free to email support, or you know the least be spending to hear how you get on because this is my bread and butter. I've been doing it for years. But it doesn't mean that what I've done is easy to understand. So this your first time. I'll try and jump on a call with you and walk you through it or go, go see your accountant to walk through it. But I'm happy to go through it. I find the stuff super fun. Yeah Well, I find fun is trying to go through the discrepancy. Why is my profit not like it could be because if this model's right. So the model is not wrong, but my gross profit is not there. What's going on. Well, this might be a noise in the time it is your quota jobs have stuffed you up in that state. Try it out. So try to have there's lots of videos on the website. Better use the product please watch the one on favorites and start building your templates as fuck changing. These are all free and every day the team is holding online portal training is getting huge 80 90 100 companies a day or attaining these online. So every day, they just log in. I'll hold a weekly business seminar every week for an hour. Same time, same place. Always flux release. Any questions that you want to answer. And we can always ask them. This will we. We'll send this out to all or attendees. Or email the spreadsheet and the link to a Google Drive thing go straight and I've written a book. It's bucks on Kindle ways to give it away for free. But I see you didn't read it for free. So if you read it $9 you read a pirate nearly every he reads it goes. It's like it's kind of locked and you must be able to read it. I'm going to talk about the chapter in a year in stock control and Joyce asked a question on bane inventory control and it's really a bit like we should probably do another what would probably do. Joe is we'll probably combine into another way. But not because I'm so hot on stock control. And I absolutely perfected systems to make it work. And I know how to absolutely control stock. And I had a business on Waikiki island that made Flagstaff there and race would do a delivery every two weeks because we couldn't use pacemakers because they were too expensive or way too occasionally. So we were I was able to run a stock control system remotely and it's possible. And it was very, very simple. And I'll talk you through it. It does require an absolute to come with an absolute open mind. In guarantee I'll ruffle a few feathers and Yeah, let's do that. One is it is covered in my book only $9. So do you grab it and read it. Actually Yeah. You'll find it quite valuable. It's written for businesses that are up to growing. They want to grow it. It's good for coming out to about 15 to 20. Sighs it's right for you and your operations manager to really know how to run a trace business. It's written for you guys, what's the question. To be solid why do we keep going through them. Good on you, Danny. Good is mate. He's making five bets he's going to make more in. Good Laurie. I your heart and fix prices. We get a fixed price to decline every job. Love it. I'm such a believer in pricing. What I'm not a believer in is just making up in your head and getting all year 15 in a box not in the box. I'm a huge believer in doing quoting correctly and actually adding up your labor correctly travel time time state materials rubbish removal. The visits all that stuff adding an all the mileage vehicle recovery charges adding and miscellaneous silicone screws fixing that building every quite properly. So that you truly have a handle on what the costs were. The only the only long term way to grow this business is to have fixed pricing to customers. It's awesome. You since you'd give a fixed price you can then ask for deposits. The customer knows it's coming. You get better cash flow fix pricing is just as wonderful. I love it. It's the best way Mike melvill sciences. Where would you assign Alice for quiting when they are not chargeable e.g. pay yourself a couple of 40 hours. But don't charge 40. So even though if you gave that level of detail, then you would start creating yourself an individual spreadsheet for yourself and then you would start working at your own ability to bring an income. So yes. If you want to get to that level of detail, then your spreadsheet needs to get next level. We need. You need to learn how to do linking spreadsheets which is actually really easy. Or try and show you show Trisha how easy it is to do a linked page and appreciate it. So let's just call those linkage with us 100 or less for 100 right. So let me just bring up. Let me go to j.c. Let's say, I want I want to bring that value or that number through. I equals minus the equals sign I go play these numbers. And that one sale could go into. And I go into I can drag that one across. And that's it. That's how you learn to stretch it together. It's that simple. So as soon as you mask that you go, oh, it's actually really easy to write a page for every person. Add the totals and then just bring the titles to another page to add it all up. That's it security easy. It's got to get you to doing it a few times and thinking, oh, you got logical. So my answer to you is if you would have to build a separate page for every employee and link them to allow for that reality, which is a true reality Julie it will help. What are the big cheeses right leaning Julie. That's a big one. Yep, that's for sure. But I want to I have often run right shows on that slide thing's been like this to totally right. It sounds good. Looks is we're a fixed price company, you need to check with you. Yes, you do. You can. Are you the email. These emails will be emailed I think 11,000 for the book notes. It's Kindle is Kindle only sorry. But you can just put the Kindle app on your iPhone and Jordan see you just finished the book on committed yet. Nice deal hard Tom the hard copy trying to get that loaded on Amazon trying to find someone yet. So you can do. You can order a hard copy from online from. It's quite good. I think, the questions. And we are on where over time. What are they going to ask all of you. I'd love you to run a poll next week is because I've been holding sort of daily phone calls of people. I was wondering if you would be interested. That's like holding like maybe an eight to 10 week course that I'll run once a week like an hour. And we can invite say maybe 10 or 20 companies to join and we'll actually go through the book through all the stages of growing a business. And so make it make a little community of customers who are actually interested at actually growing their business and actually making changes and actually getting on top of it makes you feel about growing helping companies to grow as fund runs. Super helpful. But the caveat is I will charge you for it because I have found that if you don't charge people often don't connect because I mean, one time, I was doing a coaching with mastermind seminar we pay. But we also would get fined if we didn't tune up or complete our action lists on the due date. And so I would do the same because my time is really valuable right. So if you don't tune up and don't do your actions. It's actually, I find it quite disrespectful. And so if you don't tune up. I will find you. So he had credit cards on file, which charge you 100 bucks and it would go to charity they wouldn't get the money. It was just fine. We'll do a poll. But if you are interested just like a I'd be interested in joining a coaching group and want to hear comments that are you going to pay, say that you committed a crime. And I also would like it to be. It's action based right. If you come as good. I want to see change and make change happening. And if you don't do that action isn't going to find you as punishment for not doing it if you're interested in that approach just flick at least an email and say, yeah or find out more and we'll discuss it more. Oh no if you're killing shit. Are you OK. OK Well, the media response like, well, all OK, well, we'll talk about it. Yeah Good stuff goes, well, I can't do pushback any feedback. What you want for next week. I will we get these flights out today with the link to the spreadsheet and killing sharks nine interest. Perhaps keep the photos together. So we can be ideas off each other. The spark is only known allowed. No, of course, anyone can come in. It would be great great to see it. Great to see everyone. That's all from me. Thank you so much for attending. I hope it was useful on having a career directly to talk you through it. I know it was only a basic spreadsheet. But I didn't want to make it too complicated and get it too overwhelming. So hopefully it's enough to get you started anyway with this good day and goodbye. And will see you guys again next week. OK see ya. 

45 min read

How to pivot your business and develop new income streams

Watch Fergus founder, Dan Pollard, share his story of how his 19 person plumbing business got through the 2011 recession by developing new...