45 min read
Watch Fergus founder, Dan Pollard, share his story of how his 19 person plumbing business got through the 2011 recession by developing new...
Learn how to maximise time on site and work out chargeable hours.
Well, good morning to those who for tuning in. We've got to give it a couple of minutes to leave and join in. We've had a lot of registrations for the event site just click on through. It's going to require your brainpower. So if you can get yourself a coffee and energy drink water. Get warm it rugged up there will be recommend and recommend getting yourself ready. So you can pay attention. Certainly going to be a little bit intense as we get into it. So I'll just start the general housekeeping. Right now the numbers are still climbing. So we just we just let it. Let it out. Let it get steady. So it is always a the nights the spreadsheets will be seen till after. So you don't have to worry about not not getting them. All right. 12 o'clock sales will start. Right So thanks again for joining us. I'll just start talking. Well, we just give it a minute from those last ones to the teams. And for those of you who don't know me, I'm Dan Paul out gender figures in a long time, try and he'd been running trade business since I was 2022 years of age and had a couple of failures in a couple of successes. So it's sort of no, no, no what I'm doing now is just the housekeeping and you will want to be metered just to avoid background noise. But if you have any questions, just talk them into the box lunch then there's like go or at the end, there's going to be some good questions. So if someone else has the same question, feel free to vote. It's like it's a priority right. So is if you've just joined in just mentioned, it's going to be a little bit intense issue this first in about 5 or 10 minutes. When I drag up a spreadsheet. It's going to get really intense. So if you can get yourself a half a glass of water. Keep warm get comfortable. So that you can be fully engaged. Right So this is what we're covering labor materials. I mean hits how to increase billable hours and then the cash flow forecasting and then some cash some sort of focus reports on some sort of change the order. But I've been working through it and arrives I get. So I'm going to need all of your CCPA, which is your central processing and your brain power because I'm going to I'm going to start on the spreadsheet. And I'm going to do my absolute best to explain it to you. But I'll need you to order you actually based to understand it. Because what I can guarantee to use if you understand and use it, you will find it like changing it will actually. But absolutely to change your business. If I can explain it. And you understand the spreadsheet, then get Greg over. I think one of the hardest things about running a trade business is most annoying thing I found is that you have to earn your money every dollar every day forever. Like there's no recurring revenue stream like a rental income. There's no products like timber or concrete that we're selling. The customs boys with Diane diamond in you can of look into the revenue stream. So in other words, you don't work, you don't eat in the single biggest aspect to this and picks us is the Allies were actually able to work and charge and what goes hand in hand policies any time not spent on site is often non billable all absolutely perceived not billable because customers just don't like and not paying full time stimulating materials or time or site. And the other big thing that I'm not sure all of you are aware of is this very, very important fact. So just think about it that on average, a trainee stools about $100 an hour's worth of materials an hour. Sometimes a bit more. But less depending on what's happening. But on average that 100 bucks now of materials. And if you're making a 40% margin on those materials you're making $40 gross profit for right now, the working on site. So every hour they're not working on site you're losing that $40 worth of gross margin on materials. And that really adds up and plus you also run the risk of the jobs not going well, because it trades are off site and you also are running the risk of trainees not charging for it. Almost like since a really like a terrible, terrible home run when they're all off site not working. But to start everything now going to take over the spreadsheet and start and stop explaining the spreadsheet to show the importance of everything really now. This is a spreadsheet. I did it two months ago for the cash flow forecasting and I've updated it a little bit more. So it's even more accurate for you. So right. This is where I need all of you need to be comfortable and I'm hopefully having your full attention because this next 10 or 15 minutes is going to be really, really hotly life changing for all of you. So here we go. So this will be free a scene at the end. So what I've done. On the since he showed his feelings images. Everyone should be charging you should be pretty much charging for the markup on materials and I'll show you why. OK So here's what we've got what I've got. As I made some assumptions that you tried is going to work eight hours a day. And we're going to slice that six of those hours a chargeable because the reporting and figures shows that a lot of you guys are only around sort of 75% 80% effective charge. Right right. So you can play with this right. So the whole idea is you can play with that number. And we'll update the spreadsheet. Now I'd like this number here. This is your GST. And only if I lose my bet I've seen this about. But I updated was that these ones here. These are place all names that you can overwrite and then put in here. What you paid. The people and what you charged them out. And what that we'll go through. That will go through and onto these seven sheets and that will work out there. Their allies can work and charge in the end. And so what you can do is you can if you've got apprentices other trainees whatever you can adjust the days they are working right to really account. And what it will do, it will work out how much you have to pay them wages and how much labor income, they can earn for you right. So this is a workout exactly what you can get. And so that's done for all seven of them. And that's controlled from this page here. Say all you to do is a justice page. These numbers. These numbers here three are higher than adjust these numbers here. And that will flow through into these pages. OK Yeah, the other thing I'd love you to do if you could let's go into overheads. And so what I've done here the default overheads in here. If you get your zero pay now you can just put in here you overheats. All right. This estimate worked exactly for me as European. That'd be great. Same for you materials. So if you can just list in your big and your big material you bought from zero your pay. Now put them in '12 months. What you sold them for. So for I try to put big headings what you sold them for. This is what you bought them right. You're the reason I want that will then give us this will all total onto the summary page right. So you can see what your total labor income would be what your total wages paid what your gross labor profit will be. Same for you materials will also give you gross profit. Net profit will work at your GST your prob tax your holiday pay contribution right. So work it all out for you recently. But why is that important. This is why this is important. So what I'm trying to show by the spreadsheet is I just don't put this back to about 60 sitting here because this is kind of likely right. So most people are lucky to sort of be around 75. I need to see charge. Right right. So these are sort of common highlights and common charge out, right. Like so that means you're making about 35% gross labor profit. So this is your labor income. And your wages paid from the spreadsheet right safety adjust this you adjust these figures to be for your business. You go through these to make sure it's accurate for your business. It's already set up for default holidays they stock state dies and stock prices already real estate. So the only ones you might have to adjust is you are apprentices which I've put in at lower rates here for the extra block course. That's right. But that wouldn't have a huge impact on the labor they're going to gain. But here's what's really his history gets really interesting. If you can put your materials, what you bought and sold from now if you can't be bothered doing it month by month like I've done and the spreadsheet, you can just overwrite the big figures in here, and it will still work because the big thing we want to find out is how much materials profit are you making. Right So how much you buying and how much she's selling for as a percentage. I've seen this one up at 35% right. On average you should be aiming for about 40% 42% margin on materials overall. And here's why it's very important. So we can say we have a total revenues at revenues meaning all your labor income plus the materials you sold for will add up to this figure here, right. We now know what you paid in wages and what you paid in materials make seems right. So that would not give us a gross profit here, which is 35% of turnover I'd say. So you've made a gross profit of 35% You should be aiming at 40% on average right. So there's a real good 40 30 team now. There's a very fundamental role in construction, which is you should be aiming for about 40% gross profit limiting your overheats to 30% So you make a 10% new profit. So as we can see, this company over is at 37% And they're actually making a negative 1% profit. So not right. Right now this isn't a bad margin. So that's right. These overheads are a little bit high, but not too bad. Now watch this. So we'll just get just get this back to seven hours or something. So now 88% effective, which is not bad. Which is you know which is probably, which is why you want to be hitting right now. Now back up the 6% new profit. So they went from losing money to 118 grand by charging one hour a day more to try to place it. So not bad. Right We can now see the overhead drops. Right because I mean, there are a percentage of your tune that say by increasing your effective charge hours you were able to increase your turnover which reduce your overheads as a proportion. Right But the whole point of the spreadsheet is to go with 6% net profit. Really I want one too many. It's not worth it. So they want to want you to do what you did in play not to charge out, right. But you can see it all changing on screen. OK So now we're getting a 50% gross margin right. We've now got a 40% gross profit 32% overheads 10% net profit. And you make two undertrained now that's worth being in business for. So what I want you to do is take the spreadsheet and when you get a lot of your figures from 0 to find out what's actually going on your business because what the spreadsheet will highlight it will highlight you when you fill those sales. What you need to do to a charge out write all your percentage hours worked to try and get your gross profit out. So if you don't know the procedures hours with IRS is a report and Fergus strengthen the I can't say this this isn't a dime a dozen. There's no doctrine here because I don't want to see someone's actual data. But this report is in 0. It's under reports. It's understaffed. Either of you you click it. This will come out date range and it will then show you will refresh it. Destroyed social sites and dummy data for the day. But it will show you your percentage of Alice charged out because it's an. You need to know what you the secret of Al is charged out is using a few things today. Sorry and a few technical things. Well, the one thing I really that you need to get a handle on is what is this number here. Right what you perceive this charge at right inside to find it. You go to you Fergus stuff. Ivey report. And that will give you a big number. Right because that's the big one that you need to get a handle on. And so if you do that fill the cigarette you'll actually know what's going on your business and what lever to pull. Right because the big thing is is where is where's the money leaking out of your business. And so now we're going to start, then into, like, how do we now keep the labor more chargeable and more more efficient on site. Now before I move on. Are there any questions on the spreadsheet. Was it just slipped me. I quickly felt. Was it too fast. So I have a referral or are there any questions on this before I move on. Just just please talk your questions into the question box. And I'll ask them before I move on. Or if you think that was easy and genius just let me know when they got right now there's another really good thing that you can say, please stop me miss. So this is under each person's timesheet overview at the bottom of the page, you can see each person's log to ours right. And how many hours of percentage that charging out. And this is a big one, because this is how you sort of want to incentivize your staff to tell them how many hours, they need to work and charge out. So this way that one starts. OK So let me. So no other species either way. We'll get back into our slides. Right So what I like to think about. I'm starting at a really high level business point of view, again, really high level. So then it's really important to think about having that business structurally correct. OK And so what I call this is like call this the business is like a line of control right. So if we can see the line in the middle of the screen can't point to it in the case against this is the stuff the business is under control right. So the business is able to control labor materials. I am really well, right. But those are also the biggest holes in your bucket right. And you don't get to make any profits until the cash coming in exceeds the holes in your bucket. And so the only thing and anything that brings in cash is when you do your invoicing right. So since the invoicing goes up. This is when you have low control because the customers are in charge of this right. They've got invoicing collections in cash right. So this is like control business. Control But it's really important to think about labor is what it helps bring in cash is also a big hole in your bucket with new materials overheads and you'd hate to think about how can I. How can I make those holes in my bucket as small as possible. So my bucket can fill up an overflow like this only when it fills up overflowing this community take profit and cash our business right to a couple of questions. Have there been if the GST is on the summary page it a page, there is a GST. Got to fill and why is it a ploy pursued by anti pirates to avoid. I don't understand your question, why. There's no way the system will work at your percentage margin. You just put in what you pay and what you charge out. We put it right now. The other big things to think about your business is what controls it. Now, the reason I'm talking about this is it makes sense, a bit later on when I talk about trying to get an office people to work. Now on the left hand side, we've got on the top, we've got external and the bottom, we've got an internal. So is it. As it trades business. We are reactive right. So someone calls up with a broken pipe. Cable table been dug through whatever. So that's external urgent reactive right. And it has to be the but the business has stuff its internal important proactive such as invoicing health and safety systems branding marketing right. And those two are often at odds. Then there are all UPS in it. It's actually what causes businesses to break and causes that most stress in the business is the tension between keeping the customer happy because it's urgent. It's this external is reactive and it brings in the case, it has to be done. It can't be ignored. And yet. How do I get the invoicing the cash the collection, the safety marketing that needs to be done. Instead, the biggest thing I learned was actually you don't get people to do two different roles right. If someone has external facing they only do external stuff. And if someone's internal they only do internal stuff they don't do anything urgent. It's very important when they get into it. Well, I think we need to employ someone right. This is very important in your mind to get the separation between external and internal dynamics. Don't mix that. So you don't get people to duty roles. So forth. For example tradesmen are employed to do work right. Twice people are not employed to do office work. I don't like it. I want it. There is not like it. It's because it's means to be proactive in is it. It's at odds to being reactive right. So they chose to go out and fix problems. And then you want to try and be honest, people to try and be proactive in harder materials. Do you have that safety is like it's such a mind chips shift. That's what breaks us. I think you need to look at your own lives and look at how much we procrastinate doing what we want to do because it's the mind shift required to change designs to go from doing work to not only to do paperwork. It's very difficult transition in slow point space to not put people in those difficult transition signs. So what. So when you think about your business. So this audit of chargeable hours because charged is the single biggest I could bring the money, and run. But as the business conceives you need to be maximising your labor utilization and labor recovery rights. So what that means is if someone's working for you 10 hours a day right. How can you utilise and recover as much of that hours a day as possible. Right you want to be. I for nine hours a day utilization and recovery right. Isn't this. My point having someone working 9 hours if you're not actually able to build it. So what's the point. You don't need this to standing around just being on site because I that it's utilization and recovery. The next big thing is maximising your invoicing frequency. You want to be. You want to be invoicing what you can every day not every week, every day invoicing what you can. And then also working on collections rights and maximizing it this was going to maximize the cash coming in to the business and also the next year in revenue. Now, I haven't mentioned materials there because you labor materials are so tightly linked that if you've been a working tradespeople sorry, could trace back to working 10 hours a day billing on you. They'll be maximizing the materials put in on site as well. Now on the flip side, what you want to be minimizing. Now when I say materials, what I mean by that is you want to minimise over buying of materials. So you don't want. You don't want people buying tonnes of materials that's sitting in the veins right. I need five index or five points this or I buy you don't want, then buying stuff it sort of disappears and of course minimizing overheads which might see most of us are pretty good efficient as times you don't want to be getting any vehicles on lace. You want to be just you really being really tight on cutting excessive marketing spend if you have any branding anything that was a bit excessive. You need to be sort of minimising that right. Because the result is the profit and cash flow. Right So if you saw on that first slide, we want to maximise our gross profit minimize overheads and the result is profit in cash right. So that sets the paradigm right. And it's the phrase I love is operational excellence leads to financial excellence is the only way it is in business. You've got to get your operation sorted and in the financial results will come because of that. Now I see the figures my nightmares you struggle to maintain the same. I see. So many businesses around 2% to 4% any profit definition working from home. But businesses that have staff and premises to focus on pretty common shocking, but I understand it was very, very hard to get your labour charge rates up to 90% And when I recently started with the model is I learned to prove it to you. How easy it is to just make no money in a trade business. And yet a simple change of an hour a day is all that is required to transform into my business. All that's required. Now is very difficult to get that extra hour, hour and a half day because you have to be so organized but there's no choice. There's absolutely no choice. Now here's another really good way. I love to phrase it. Why do most companies struggle because of this concept here. And when you start thinking about this, you start realizing the importance of every hour in a trade business. One of the other constraints for us as trades, is that we don't get the charge 150 now. You know people charge 150. Yeah We only need to be charging at 25 hours a week. What would be peachy but we can't. So we've got a constrained toppings charge out right. We've got to we've got to work under it. Not just the waiters but there's this concept here right. Yeah, you're only making your money between 12:00 PM and 14 on Friday. That first 36 hours is all just to pay taxes overheads wages everything else I need between those last four hours and a 40 hour week. That's when your money's made can get quite depressing. But you just can be on your game every day, every week, every month, every year. Never saw and this is the reason I'm hemming this point home is this is why office staff make it possible to always be on right to be just always focused. This cause you've actually employed people to have you be focused and efficient. Now, the reason I sort of this one. This law is here is to show you it's very important when we talk about labor to understand that we have to have trade people working 40 hours a week consistently at 92% see our rice. Now, the reason I say 92 to 600 percent is unsustainable over the long term and 50 hours a week is also brings people out because people have lives right. So I've built all my systems and reports in businesses around the quality of life. So I traced people to doing the 40 hours a week plus lunch breaks, which means they can work week in, week out. Then I get sick that I get tired, they can have a life. They don't leave. So it's very important that we don't overwork tradespeople so that I burn out and leave if they want to work extra hours every now and then cope. But as a thing to base your business on. I believe this space to be thinking about the welfare of your staff and not overworking them right. So that I quit. So what this example is to show you the benefits of just being consistently correct. And how had 40 hours at 90 to the scene. You can make two grand net profit right. So this right here is really Paul holiday slides. All right. They just follow my case. All right. That's the that's the big one there. Right So you're certainly doing. If you are a part time staff. I'm not a fan of part time staff. Yes this is guys who have four days a week. So even though they charge at night you see on the scene you still lost 300 bucks on that guy gross profit. Right same sign if they work 42 hours at city 6% they still make less money. 1600 right. And when you multiply that by a computer. And when you multiply that by 3 staff the numbers start to really multiply quite a bit. So when you think about your labor utilization and labor recovery rates. You want to set your targets for the staff and say, you will. I need you to work 42 and 1/2 hours a week right. And believe that you need to be building 40 hours. So you need to be 40 hours billable at 90 to the scene. So putting 2 and 1/2 hours total including lunch breaks right like 40 hours actual work. 92 percent charge. That's what you're aiming for. That's just the golden ticket. Week in, week out. And so all these models are built on that assumption and if you remember where we started. If you're at 75% charge. Right average market right now. You probably you'll probably be losing money and to take it all. Please put your fingers into that spreadsheet. And you can go. He's right or is wrong for your business. I need to see your overheads right. Because you might be luckier I was only 10% and then you then you're winning but also why wouldn't you be trying to maximize your profit. And looking at ways to get the 92% you think of charge of right. All big questions to ponder. Right So why is it so hard to get labor right. Why so what this is now moving to quite a jobs struggling and quite fast. But I wanted to finish on time and answer questions. So this is talking that was assigned to get the library and quite odd jobs. You know you think we would know how long it will take to get the job done time we'd be doing it a long time. Then why do we get it wrong. So often. And it really comes down to this, you need manage the job. And I remember leading this example, when I was working for a big A, big guy big A, little company contracting never doing massive, massive commercial growth. And I was like, how on earth do you get this job to come in on budget. In the end. This is what we have to manage as a job to come in on budget. You have to manage it. It's true. You actually have to manage your small projects. Kevin on budget. And so let's talk about all the ways that a quote, job can actually lose money very easily. It was working. So this is we talk about lighting utilization versus labor recovery right. So the trains are working right. Picking up materials or the most started light will you call them white on the job well done you finish one part of the job. Right So they were working. But you weren't recovering right. So this is how jobs go, go, go south because that we utilized. But you didn't recover it very important to be thinking right. That these small flow on effects have a big impact. And here's how it works right. So what we need to get your business to be profitable and quite a jobs job torn off the job. You got to manage it is when you go to work, you need to get a team on site. It's even 30 with materials delivered and they're working on site to 14 9 hours effective work, right. All day long on the one hand side is probably how my says most of us operate. If we're being honest great trees early at the suppliers early great got. It was a really. But taking care of the merchants and you got to get through traffic. So you finally on sites side by 930 he says. Get into it. And then there's the real estate agent calls that you say all Yep he's around the corner getting a golf and fixed that little job. And so you end up with 5 and 1/2 hours effective. So looking at the bottom left hand side nine hours effective right hand side 5 hours effective fully utilized that poor recovery. Right and this is what it adds up to quite a jobs. So let's say, your average bathroom or house Reno was 100 hours spent right. You're organized. You can bring in an '11 days total as per quite the right hand side. 18 days. So you all fully utilized right. You're all busy. But you just want efficient. And then this is why you lose money. Quite a jobs really big deal right. So hopefully that will make sense. So how do you fix it. How do you fix it, and so on to drag another speech he didn't want to speak to me and drag another spreadsheet him inside the biggest thing. So I had 25 staff in my last rate business. And I talk to lots of big businesses. You know what you will find is same story. Those who get there realize that you hacked off the stuff you just can not get a big business well-run business by not investing in office staff. And the reason for it is try to the right. I mean, they just made the bank and they out in the sun. When the rain the mud gloom you know that good people. That is very, very hard to explain that all the office requirements. And that is like me breaking concrete. I'm taking the house and doing this don't it. We just haven't got the bandwidth in my brain to stop all the materials. Talk to customers. So all that stuff out. So it's unreasonable it's unreasonable in my opinion, to actually try to do that. What is reasonable is I think, for a business to provide the resources to allow tries to be efficient. So let me find my speech with this piece. Here's another spreadsheet. So that all these switches come to you at the end. But don't worry about that right. So what I've done here is I'm going to show you how it's actually really super easy to afford an office space and how you basically how you can't afford not to have office support people basically. Now one or two people know this doesn't justify it about three years. I guess. So let me go through it bit by bit. So I've been up in this game a long time. Nice try and go to the merchants. I'm saying 10 times a week. Two trips a day. Some of those times more right less 40 a month 480 trips a year to the suppliers. On average I said, it takes an hour round trip. Yeah So the time you leave. So I get a supply pick it up. Get back to site. You're very lucky David, do this in less than an hour. But on average. I'm just going to run out. I've also said, I'm only 30% of those times can't be charged to the customer. So only 30 some saying seven 18 times you can charge that travel time to the merchant. So to the customer. And that's probably being generous right. It's not allowing quite a jobs site. So these figures are based on just stadiums in the time is not chargeable I'm saying a day a child who is 90. These are all a for you. Right that means in a year you've lost 13 greens and labor. Right it's just on state that you couldn't charge right. Right however I started saying because you can install 100 bucks an hour with some materials and you're making a margin of 40% you're losing $40 nanomaterials. Yes Is building materials based not installing materials. So every hour. He's outside. You're not installing materials that you would be charging for that. You can make marginal. So therefore, a 100% of those trips you're not installing materials making marginal and therefore, you're losing $19,000 with a gross margin a year on materials. OK So that gives you this one here. Lost revenue of $32,000 a year on the trips to the merchant and on in this just on 30% of trips non charge or something. I'm being conservative there as well. So if you've got four people. It's 128 grand. Right 130 grand a year in lost revenue because it trips to the suppliers. And so what I'm saying is if you want to get an operation support person and 35 bucks an hour and they did 30 hours a week and their sole job this soldier was nothing else but water materials and for the trendy school team to order materials and they organized the delivery to keep the trays on site to get them there early in the morning. So I'm just saying, of course, someone was working 30 hours a week they could do more than just one material best they would read nothing else about that. Right that would cost you 50 grand a year. You'd have a net revenue increase of 80 grand a year to a business. So if you want to improve your business you actually have to find an office person to take over ordering materials for the guys while very few tradesmen are going to sit down the night before or two days before and start ordering materials for the job. It's just not going to happen. I mean, the old person here they might be very good. And diligent but not going to happen. And I also think it's unrealistic to Australians to do that for you. I believe it's an office job to do that. I believe it's a tradesperson still to tune up and do the work. And it's up to the office to be organized and do it for them, because it is consistent, repeatable and it's less stressful for everyone. And I also don't need to almost impossible to actually seen a big business get here without someone taking over the ordering big business that is just don't rely on staff to do stuff like this because it's just not scalable. And repeatable. Right So if you want to get your labor charge writes up you really have to start out of the equation if you want to get your labor charge out rates up. You actually have to employ a person who is dedicated to look after it now. And if you think about it this way. It's like allowing for 30 hours for full paper to do ordering and you still make more money. It's not going to take 30 TLC you get that person chasing invoices reconciling accounts is lots of paperwork. They can do that. Face it if you really want to improve your numbers. You actually have to take the risk and employ someone because the. I can't see it working any that. It just doesn't work any other way. Right So you say say you got less than an ordinary right. So you need an office person ordering materials. What that means is when you a jobs the materials at the site the foreman makes a treaty on site at 730. Right because accountability is what gets trainees sort of motivated. So if you want new bathroom Renault's L3 nice whatever, to come in on budget you're Forman's need to meet the tradesmen site at 7:30 in the morning and sit the time the delivered on site working. That's what we're going to do. Now the big thing is once you're on site is telling the trainees when you expect to finish because you know it's a trainee tunes up on design jobs people will win tonight tomorrow or Friday doesn't really matter right now. You need to tune up on site with the foreman materials get delivered to negotiate you're going to these people are done by this afternoon, the speak this coming whatever it is. Sydney expectations. It's amazing how much harder it will work when we have a deadline. And I was very it was very big on quoting worked at the trade currently site to buy the lunch. Now it's a cultural thing. I know a friend of mine now he's paying either a delivery faith if the guys get their lunch delivered on quite a week you just kind of food for the guys to be going off because you know got 20 minutes to find a bakery or whatever you know get it right back. And then they'll eat it. And we know they've taken an ally Aaron 15th was Mike I mean, really, that's just basically have a half hour, 45 minutes. And it's also that it's breaking that mindset right. You know you all know once you're on site, you get in design you sign design. But if you go off site you break design right. So it's got to keep you trays on site bring your lunch to the job site get materials delivered there. Classic old saying, if you don't know where you're going you're never going to get it. So you've got to change phrase what the expectation is. So that they can have something to aim for now. You hear a lot about I'm getting asked to incentivize you pay performance targets. What do you do. And it's sort of like you need to work it out. But you sort of got a you have to come up with some sort of incentive senior violation system right. So I mean Ferguson's set up so that the trainees can see the chargeable percentage right. And they can see their hours work analysis charge because I'm a believer that you should be coming up with a real reward system. So I you tell them what to achieve. Right which is I need you to be working 40 hours a week at 90 to this in childcare. Right right. If you do that, you make a stack of money, but you need to know give them whatever bonus it is. So they can you do this every week will give you all night, whatever it is x amount of dollars or these tickets to that. But you need to be rewarding them with some incentive to try to be that efficient and effective. And second. I've got don't skimp what I mean by buying the health safety gear. It goes a long way to winning to the guys to care cause if you don't care about the tools they've been the health and safety. They're not going to care about doing a piece for you. So in order to get the best out of your staff. You actually have the ball in the basket and the bee's toes. Then they got all he cares about me. So I've got that in there. Now three communicate and you just sit down with each employee and find out maybe not use enough to be quite difficult for employees to be honest with the bosses of fear. If you're the boss. So you might have to get someone else in to talk to them or someone else in the field that they trust and don't mind talking to and find out what it's like really at work. And they work 40 hours. Do they want to do that like you did not like you what's going on. Because you've got to find out why they would or wouldn't want to work. 42 and 1/2 hours and work tonight to the scene. Now they're resentful happy prune eyes and he gets on the talking to find out what it's like at the coalface. You want to bring about change in four is what you've once you've talked to them find out what's going on then actually take action. Make the changes that this report from. Now he's a really good example. That's great. I had a very good guess for working for me. Excellent you still get the cash on the completion. Customers love them rave reviews. And just making their money is years ago. So we finally looked into what was happening. And he was an awful charger right because what he was doing was he was only charging for hours on site. But as a gas fatality you. And guess what he could see this appliances. And so he had seen a lot of time getting parts and driving around or drawing on Oakland and he wasn't charging the customers for that. So of course, the customers loved him because the bills were small but his charge right was under 70% So he was losing money hand over fist win. So once a child wants to change the rules is hit the charge for every hour. He's working to the customer. The in, came right. So you start performance might not always be your best performance. But the expectations. You need to make clear is that to your trainees is that they are responsible for getting the cost onto the job. That's their big responsibility right. I've got to get all the labor and materials onto the job. Now what you charge to the customer. That's up to the. That's up to the frame to make, right. Because you may decide it doesn't fit that, right. But you need to know what the costs are exactly. So you must must tell these trainees you just put down every single minute on the job. And then will decide what you charge the customer. Take that off their hands if they're worried about it right. You take over charging into that to the client. Now this is a really quite firm on this really firm on this. It's not the Trey's fault that they charge sales and not at 90 to the scene fault. That's a management responsibility to put insistence processes policy culture. So the trainees are able to be 92 percent efficient. Right you can't just call enough to stop being more annoying getting a good bollocking and say it this way. You got to do. It's like, no, it doesn't work that way to get the 92% efficient charge out right. We can we get you need to bring in prices in those prices is a genius someone in the office taking over ordering materials delivered to side, really signed a deal with the culture and expectations that you're on site working with unrequited bathroom job house Reno. We're not going to call you have to go to another job and keep you on site working right Blazer or office decisions. So I don't want to. I don't hear any of you ever blaming the staff for not getting to 90% That's an office of dysfunction and measured function to take over 44. Yikes summary you must charge for every hour you can. Now, here's something that's really important to also consider on the billing. So Ferguson's designed to capture all the cost. But it's also flexible at allowing you to achieve your gross margin. So what I mean by that is I get it. I mean, I did a job for a friend to replace these shell mics. My goodness it took me about four hours to replace a simple shell mix that we had to go to the supplier pick up the shell mix a couple of times a couple of fight lights go install it. And then type and then take the parts back. I didn't NATO's built for al-islam so that is quite a bit for quite a simple shell installation chained. And so what you can do is lie with the labor you can actually be here for hours to complain a bit about it. But what you can do is you can hire the laboring wise for example, you can call a service fee. Call out for a charge more marginal materials charge him office Edmond fee whatever is required. As long as you make your gross margin. And you can hide the hours on site through other charges. So it all seems reasonable. But the most important thing is that you must get your hours and cost on sites to know what your gross margin is. Now we've done more webinars on gross margins. If you don't know gross margins of I speak extensive and gross margin. So this should be a lot of content, and we on gross margin. If that concepts need you and seen the big thing is once the hours are on the jobsite is up to your office and management team to make sure they're doing their weight that trade can maximize and charge what else. That's the big one right. Please don't blame your traders. Look at what's going on in the office. That's not enabling traders to be 92 percent efficient. And then just keep an eye up how effective your employees are charging at the time because you just never quite know what's going on. You start looking. Well, I think the you know what. Well, what we did was we had a weekly meeting Stay there 15 minutes, 20 minutes where every week, we would look at the Alice worked and Alice charged because you have to have that meeting every week on the staff. Either you report taking it to keep everyone's mind laser focus on the outcomes that you're after. Which is it. Hey, guys, we're supposed to be at 320 hours to 70. What's going on. Why they charge on Al there's no. Why are they not effectively charging. And it's a daily, weekly prices that you just can never take your eye off the throttle and whatever it is. Oh hey, I got through it. Look at that. 13 minutes to spare. Coach oh, well, that's good. Can you please ask me your questions. I've now got we've now got 13 minutes to go through any questions. So it's quite close. I type in your technical questions right. I might bring up that I might bring up this spreadsheet. So we can see it again. Now for the people who ask about GST. Yep GST is there. So you can make a 10% 15% Now I would really encourage you guys to take the time to look through the spreadsheet and try and make it work for your business because you'll always also for one of your numbers that there'll be some discrepancies like you might find is you're at 92 the scenes and you get all these numbers right. But the wages paid or income is just well out and that will be for reasons such as discounts and credits maybe overtime rights and other payments you might you'll stop. But they should be within qe because what we're trying to get your business to align to is getting these two figures as close to what you were zero figures should be because when your business is humming the closer you keep this to sort of 90 the more accurate your business will be. But the reason I've really put this here. I really want you to go is really, really, honestly, if you just fill this out and just play with these numbers because what I want you to try and grasp is a huge impact Right. So just look at this. To say 4% doesn't sound bad, right. Look made from 55 to 55 grand. 3 percent new profit saving goes to make the 7 88 19 to 100. I mean, this is just it's just mind boggling how one hour a day. You know this is of she goes, can make such a dramatic impact. Indeed that is actually that dramatic. This is not being real. He is not exaggerating the importance of that. One difference in charge out, right. And so why the reason I also really want you to do it is that even if you do this right. You could 80% which is about right. What you're not going to get 9,700 percent. It's just it's you might have for one week, but you can't do that week in, week out. Right other. I want you to do that is because I need you to be playing to a charge out right. Because when I say let me put this back to say 90 they make to 60. Call you back to fight the same thing in right. So to me, because these over. OK So the only chance I make more profit is can you make more marginal materials and you go look at what you're charging and you go, I play well, maybe I could sneak 5% obviously more. What can you cut your overheads. Yeah Well, I could try and cut my base. But if you look at our region last year chances are there's not much to cut. So what are you going to do. Like your only real answer is you can either increase your chargeable hours increase your charge outright and increase your marginal materials but until you fill out a spreadsheet you're never going to be able to pinpoint what's actually going on in your business. So I really do hope you guys can follow the spreadsheet writes Yeah. This will come outs not night. It's about it. Well segments. How do you account calculate the percentage of holiday pay. I'm sort of as a general rule in New Zealand. You just allowed about eight seems what you pay someone for their holiday pay in Australia might be slightly higher. But again, it seems. But Yeah. So what I've done here. Some age. This is really quite good. Because this is actually quite why I've done. This is I want you to be thinking about how much money you need to be putting aside every month for your GST to be paid for. I think now that we've got here because the overheats aren't accurate enough because they're not real. It's as that make up numbers, right. But if you think about how much tax you should be paying if you're making a profit every month. Let me just go put numbers back in is real again. The reason we're not paying any GST. So making 4% new profit run only we just put the numbers back up to there to be about right. So no see more more real estate. It was frigid in the cold. So then so then this is your GST obligations that you that you'll be having if you think about your effective taxation right. It's always good to be knowing what your tax is. Now I'm coming up this prop tax and GST linked. So if you got GST to pay. It means you've made a bit of a profit. So there is a link between GST and payroll tax. And so I'm a huge fan of making voluntary tax payments. And so then this will stop letting you know what your provisional tax requirement is per year and a cycle at 20 because a good accountant should be able to get your effective tax rate Dante at 20% 25% But if you paying 20% you'll be carrying off the worst of your tax liability. And I've got holiday pay here because it's very helpful to put that away every month into the secret bank account for your holiday obligations at the end of the year. That's a Biggie. So the spreadsheets was this. It's not perfect. It's a very good place to start most businesses. I'll get this right. I'm trying to strike the right balance between keeping it simple and effective and good enough because I've fully detailed one with a really, really complicated. And then it would be to 200 to 4. So I might keep it a bit simple. Now as always, the big disclaimer is there is a big disclaimer. This is a legal disclaimer. I'm not a financial advisor. I'm not a registered chartered accountant. Any financial decisions you make based on the information I give you. You must run past your trusted financial advisor based EMS so why this is why in Cuba. So when you read my question regarding the as marginal prices based on the charge. I made on your site. So I said, why is giving is what is my margin. I should be charging out rather increasing what is fair and reasonable. Now that is a great question. So when I would so rather answering that why I said, I'm not going to ask that because that's not the way to do it the way to do it is what I've done here Wayne, which is I've had to put in. So this is the Pyrite that sets the given right. But what does that charge out right need to be the percentage charge out right in order for me to make enough gross profit in a terror profit to pay my overseas in India with 10% net profit. So rather than thinking about what's the margin. It's like, well, what do I need to charge to my team to see new profit. Right So you use it using math to determine what I need to charge out. Now you say, well, what excess shows need to be 120 but the market won't sustain 120 right. What if you say I need I need 120. Yeah but the market wants to sign it. Well, you've got it. So this is called the land of hard choices. So if you get in this position where the figures show 120 but the market will sustain 90. Right what are you going to do. You've only got two choices two choices. Right So if the figures show you need to charge 120 out. But the market conditions allow 100. Your two choices are only this cut your overheads right. Cut those or can you charge more on materials. Right to offset that. Can you charge more materials but that's not possible, then somehow you have to increase your revenue by employing more people. It's really hard. I hope. I hope you'll. Generally speaking at a trade business in this environment because when you're going into recession. You will have to cut your overheads. So hopefully you fill the spreadsheet out and let the numbers do the talking. And it became clear what needs to happen. Generally speaking, I would be very, very surprised if you were spending more than 30% on overheads. You really shouldn't be if you are you need to cut your overheads. Right and if you get in only two charge out right. It should all know me. Always works out correctly. So Well, I think that brings us to the end, to the end of it as far as what we can them. Or if you've got any big questions on this. Can you email. Email us. And then I will do my best to call the call you guys to the last line. Sorry I missed the email. I've got a book, actually. I've got a book but all the stuff is in this box. $9 on Amazon right. So just go by that. Yep So an email. We've been at further. So I'm happy to do a follow up webinar. I'm happy to do a private zoom group with some of you. I'm happy to phone some of you next week. If you've got questions on that. I'm happy to. Yep happy to do whatever it takes to help you to get through it. Understand it's reaching because it's a really big deal. And if you get it, you can find out what's going on in your business. I thank you. Elise you way out figure Stockholm and then. Yeah Honestly having an open zone group for a forum called use immunity whatever it takes to help you to get a handle on this Richie would be my pleasure to help you all. Thank you all for your time. I hope we have a great weekend, and I hope you spend it filling out their spreadsheets and the best to all of you guys. OK, thanks guys. See you. Bye
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