Where builders go to grow their business.

How Builders Lose Money By Scaling Up

To grow a building company you need to advertise. But what happens when you advertise a business that is losing money?

The answer is simple, you lose even more money!

Let me ask you a question, is your business making money?


Before you answer that I need you to think carefully…


How much are you taking out of your company in wages?


I mean really taking out. Not just that figure the accountant told you to show the taxman each month, I mean EVERYTHING. The bit you draw at the end of the year end, the bit you take out as you need it…EVERYTHING.


The reason I ask is in our experience of dealing with hundreds of builders the first number they tell us is $30k-$50k. But when we dig deeper it ALWAYS comes out $130k-$150k!


Am I ringing any bells here?


It doesn’t matter what you are taking out but be honest with yourself, if you are drawing $50k in wages but taking the $100k net profit the company makes in order to live, then your wages are $150k. Simple.


The problem in this example is the company is not making a profit. And in our experience building companies with sales of under $3m a year are either not making any money or are actually losing money.


So here is my question, “Why would you advertise a business that is losing money? If you are losing money on sales of $1m a year what happens when you grow that building company to $2m?…




Don’t believe what the so called experts tell you about the economies of scale…This is the building industry, those rules don’t apply to us!


If you scale up the operations in a factory you get economies of scale because the rent remains the same and productivity can be improved with machinery…


But for builders, expenses scale up disproportionately in relation to sales. A building company simply does not scale up like a normal business. So if you advertise a building company that is not making money, the additional sales will result in heavier losses!


That’s why marketing is not a silver bullet, you need a strategy.


Here’s what I need you to do right now.


Look at your figures for the last financial year. What are your real wages? The amount you need to live on. As a guide, you need to be covering all of your outgoings, tax and be saving or investing 30% of the total. That’s when you know you are putting down a realistic wage.


If you are showing $50k in your accounts but a realistic wage is $150k then add $100k to your expenses.


So what does that do to your net profit?


Are you still profitable?


If the figure starts with a minus you are losing money, so seek assistance from construction industry experts like the Association Of Professional Builders.


If it’s a positive number, Congratulations! You are on the right track. But there is still more to be done, your next target is to get your net profit up to a minimum of 10%.


Are you there yet? If you’re not, you need to make changes to your business starting with how you price your jobs.


if you are not achieving a 10% net margin then you are probably not using the Pricing For Profit Formula when quoting jobs.


We have created a full training course that will help you so make sure you click here to enroll.




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