How long til we start to see the benefits?

[indizine 10]

Yes, do take a deposit to at least cover the cost of the materials, as that is considered common anyway.

[robwillow 10]

Also, i think it would be useful to have accounts with builders merchants so we don't have to pay up front

It is possible to get these accounts when not really in business, so I'm sure you could. However you may find merchants are less keen than they were, as the down turn in spending bites.

[ismangil 10]

Its been nearly a year since we set up...how long will it take to start to reap the (financial) rewards?

 

How long did you originally figure it would be when you set it up?

 

Look at the assumptions back then, and see which one was not correct or need to be adjusted. And then re-plan the cashflow forecast.

[Monkeymagic 10]

I'm not an expert but it sounds like a situation that the experts call 'over trading' where basically the profit one job is always required to support the overheads or costs of the next job so although you do make a profit on each job it becomes a cycle of reinvesting to keep the business going, I have found myself in this situation once or twice and I think its a case of getting cash flow, overhead costs, direct costs and a business plan for future investments down on paper so it paints a picture of whats going where etc. Like I say I'm no expert but I find looking at the business plan every so often and then changing it to suit recent developments and future planned changes can help keep the business going forward...good luck!

[TJC1 10]

My husband and I set up our gardening business last August and although it is going really well, the business is swallowing all of our money and i've had to transfer a chunk of my savings to help out with costs.

 

I work full time elsewhere and help with the business in my spare time. My husband has three staff working for him but doesn't have hardly any salary for himself because all the money he earns just keeps going back into the business.

 

I've always been one who manages the finances and have always been very careful with money, so to be in a situation where i'm having to raid the savings and worry that most of our accounts are at a low level is quite frightening!

 

Its been nearly a year since we set up...how long will it take to start to reap the (financial) rewards?

 

Is the Business long term profitable? as you are realising its really hard to stay motivated when staff are getting paid and you arent. I would suggest if its got to the point where its not making you happy / not enjoying it and you are not getting paid / its sucking up savings with no forseeable return then consider doing something else with your life. Lifes too short to be miserable AND broke

[BUSTEDSOFA 10]

The point is you have been trading for less than one year You are paying 3 salaries and IF your Husband has been able to take a small amount as a wage, I know you have said that you are dipping into youir savings, But How much is owed in to the Business from customers still to pay ?, after taking all this into account will you be showing a Profit ? I am sure in the next couple of years you will start to thrive,as I can see in the next 18months the economy getting better and Building work to recommence, Also as suggested it is best to make sure you get a Deposit up front to cover any materials as this will ease your cash flow problem and if you do have to chase the payment it is only the Labour charges you are waiting for.. Good Luck

[squidge00 10]

The point is you have been trading for less than one year You are paying 3 salaries and IF your Husband has been able to take a small amount as a wage, I know you have said that you are dipping into youir savings, But How much is owed in to the Business from customers still to pay ?, after taking all this into account will you be showing a Profit ? I am sure in the next couple of years you will start to thrive,as I can see in the next 18months the economy getting better and Building work to recommence, Also as suggested it is best to make sure you get a Deposit up front to cover any materials as this will ease your cash flow problem and if you do have to chase the payment it is only the Labour charges you are waiting for.. Good Luck

 

Hi - we do have money owing from customers and the amount due in is more than what we owe staff for wages so we will make a profit. I think we have a cash flow rather than profit problem and we need to learn from mistakes and fine tune the way we manage ourselves by implementing a few of the ideas on here!

I hope this is just a temporary blip until the next lot of invoices are paid - its just hard to see the savings that were reserved for something else be eaten up by the business but i hope we'll be able to replace them soon enough.

[TJC1 10]

Hi - we do have money owing from customers and the amount due in is more than what we owe staff for wages so we will make a profit. I think we have a cash flow rather than profit problem and we need to learn from mistakes and fine tune the way we manage ourselves by implementing a few of the ideas on here!

I hope this is just a temporary blip until the next lot of invoices are paid - its just hard to see the savings that were reserved for something else be eaten up by the business but i hope we'll be able to replace them soon enough.

 

Is this possible?:

 

Consider shortening payment terms with your debtors and asking for credit or lengthening with your suppliers.

 

This will improve your cashflow:)

[steveroberts 10]

If you are pumping your profits and what should be your salary, back into the business just to keep it going, then it may not actually be a profitable business. You are merely keeping 3 other people in a job and getting no return for yourselves. If you are pumping it back in to expand, and that expansion is in turn is making more profits then that's fine but in that case you need to consider if you would rather invest and grow the business for what may be higher rewards further down the line, or stop investing, curb the growth but be able to take the current profits out for yourselves.

 

If you are having to support the business just to keep it going then it sounds like you are not charging enough because what you charge should at least leave you breaking even in Year 1 -any more is a bonus. And breaking even includes paying yourself a salary, not going without one.

 

You are possibly busy enough to keep 4 people in work in under 1 year because you are too cheap! We could all get a lot more business if we charge a lot less than the going rate, but that doesn't make it a business and definately not a profitable one. Review what you are charging, and also review your expenditure and try and reduce your outgoings. A mix of the two should see some immediate improvements.

 

Sandra; you've took the words out of my mouth and saved me a lot of writing!

 

What the OP needs to do is a simple cashflow statement to see when/how the business will become cash flow positive. If all the money is simply going back into buy materials and pay wages then the business is highly likely to fail.

 

Taking deposits is always a little tricky in this type of business because of the stories you hear of people running off with the money (or, if the businesses is struggling businesses take deposits for one job to fund another). The solution might be to get the client to pay for the materials instead (you might even be able to do a deal with a particular merchant where they pay you commissions for any client that buys from them?).

 

The very best to you and your husband in the business.

[Thorpes 10]

Yes Cash management does seem to be a problem and you already know this. Your problem or not a problem is that you are expanding very fast and all of your profits are being ploughed back in to the business to fuel this expansion.

 

To see your rewards you just need to stand still for a few months and then you will not need to invest in new equipment, the money owed should remain the same and the income from outstanding debtors after expences will all be yours.

 

You have to decide if you want a big business or a small one if you want to continue to grow then you will need to continue investing (your profits) in to the business.

 

You seem very capable of growing your business but as a slight warning that it is not unusal for successful profitable businesses to fail from expanding to quickly due to Cashflow.

[squidge00 10]

Thanks again for the useful advice - another way of trying to manage the situation is by not taking on any more big design jobs because they take too much time when we could be earning more money from smaller and more regular maintenance work. However, we are still trying to come up with a suitable way of telling potential new customers that we can't take them on...we want to give a good impression that we can't take on more work because we are very busy and in demand and therefore, hopefully maintain their interest for another time when we are in a better position to take on more work

[Cyclone 10]

With a large job could you negotiate staged payments from your clients, that way you can still take the work (and large jobs should probably be more profitable than small ones), but you can get regular payments as the work progresses.

 

If you do have to turn people down, just tell them that you are fully booked for the next several months...

 

If you don't have good visibility of whether you're really making a profit or not, you could speak to a financial adviser and get the numbers set down, then you can confirm that you are making a profit, how much that is and thus when you will be able to get your savings back and pay your husband a salary.