Stephen runs a construction business specializing in large basements and car parks. The business has been established for 25 years and has grown steadily, with revenue now into eight figures. Unfortunately, profit margins are very slim and last year, Stephen’s business barely broke even and he was unable to draw his usual dividend at the year end.
His accountant proposed a half day session focused on the key numbers in the business. Together, they put together a plan to increase revenue by 50% over the next three years without increasing the cost base significantly. The starting point for that plan was to uncover inefficiencies in the business’s processes to shave significant time off the average build, enabling Stephen and his team to do more with less. As the plan was implemented, profitability increased along with revenue.
Stephen’s accountant also got him focused on his receivables. It transpired that on average, it was taking customers 90 days to pay despite agreed terms of 45 days. By crunching the numbers, it became apparent that even a reduction to 60 days with no increase in revenue would improve the cash position significantly, allowing Stephen to take his long-suffering wife on that world cruise he had promised her for the past 10 years.
All in all, a great outcome from a simple planning meeting. If you are frustrated with your revenue, profitability or cash flow, contact us today and we’ll be in touch to discuss how we can help.
“Your goal as an investor should be simply to purchase, at a rational price, a part interest in an easily understandable business, whose earnings are virtually certain to be materially higher, 5, 10, and 20 years from now.”
“We had a fundamental belief that doing it right the first time was much easier and cheaper than having to go back and fix it. And I cannot say strongly enough that the repercussions of that attitude are staggering. ”