Building Industry Experience
Business Turnaround Services has built impressive experience in turning around businesses in building related industries in the $5m - $50m+ turnover range across Australia. These include builders specialising in:
- New homes
- Additions and renovations
- Enclosed living areas
- Mezzanine floors (warehouses etc) + pallet racking
We have also worked with manufacturers supplying the building industry including:
- Aluminium Door & Window manufacturer.
First, we review your current cost structure and current level of profitability. We then work with you to set a target level of net profit which will never be less than 10% of sales after Directors’ benefits, but can be 15% of sales in some sections of the building industry. Having done this we will work with you to determine how to restructure your business to achieve your target profit and immediately set about driving implementation. To monitor progress we will ensure end of month accounting is accurate and completed by the 7th of the following month.
We focus on driving weekly invoicing by setting weekly invoicing targets from progress claims and driving the achievement of these targets. These will always be higher than what the business is currently achieving and will result in increased weekly sales with no increase in overheads. This is combined with managing costs and gross profit margins.
Driving Cash Flow
With all clients our team sets up detailed weekly cash flow for the next 8 weeks which is updated each week. This incorporates all banking expected for each job and all payments planned for each of the next 8 weeks. Priority for payments will be payroll, suppliers, and subcontractors essential to keeping your jobs going followed by ATO payment plan and other creditors’ payment plans.
Many clients who come to us no longer have credit available to buy materials for their current jobs and are on COD terms. Our team is very experienced in managing through this cash flow crisis to ensure jobs continue, outstanding tax, super, and creditors are paid off and credit terms are re-established with suppliers. Our team also makes arrangements with your creditors, including the ATO, as required.
A well organised, well managed cash flow will take a huge stress off you and is part of what our team does. It is also a powerful tool to drive operations and sales performance.
We drive operations by scheduling a dollar figure of progress claims each week, eg, $100,000 per week. This may reflect say 4 claims on average per week, split between 2 supervisors, that is each supervisor is scheduled to complete $50,000 of claims each week on average. This very quickly exposes which supervisors are performing and which ones are not so non performers can be replaced with top supervisors. With the current state of the building industry there are a lot of good people out there that you can choose from.
Disciplined job scheduling several weeks in advance with continuous review and updates will ensure materials and subcontractors are on site, on time and also facilitate more than 1 trade working on site at one time where practical is essential to bringing forward cash flow and increasing profitability.
Managing defects well also brings forward cash flow, especially where there is strong site supervision. Defects are identified and rectified immediately rather than leaving them all to be dealt with immediately prior to the final claim which delays invoicing for the final claim therefore delaying cash flow.
Operations Led Recovery
If your company has a solid pipeline of work, then quickly ramping up the operations to complete a much higher value of work each week is very effective in increasing cash flow, dramatically increasing profitability, and rapidly reducing your overdue creditors. We have regularly implemented this strategy across a whole range of industries including the building industry with a lot of success and saved companies from going into Voluntary Administration.
In the process we take Operations Management to a totally different level from the past. Obviously, this strategy runs down your pipeline of work on hand, but this is where strong sales management comes into play to rebuild your pipeline and take your business to new levels.
- Marketing Strategy - Firstly, you will need to have a very clear marketing strategy that results in strong lead generation. If this is not already in place the team at Business Turnaround Services will assist in developing a strategy to ramp up leads and then signing of contracts to grow your pipeline of work.
- Costing Template - Secondly, a precise costing template for quotes is required based on target gross profit required from each job.
Conversion Rates - Thirdly, you need to know what your conversion rate is from lead to quote, and from quote to contract along with the average lead time from lead to quote, and from quote to contract. You also need to know the average time from signing of contract to commencement of works on site and the average time it takes to complete a job. With target weekly invoicing already determined when the target cost structure was established it is simple to calculate:
- Leads required each week, both number and value
- Quotes required each week, both number and value
- Contracts required each week, both number and value
- Value of Lead pipeline required
- Value of Quote pipeline required
- Value of Contract pipeline required
- Value of jobs in progress
- Sales Team Performance - Fourthly, we expect performance from Sales Agents, typically an average of $200,000 per month in signed contracts each, and more like $400,000 per month where estimators prepare the quotes so Sales Agents are out in the field most of the time selling. If your Sales Agents are not performing at these levels then they need replacing with those who can perform.
Sales Driven Recovery
As a company in financial trouble you can drive sales and ramp up deposits and check measure payments which will strengthen your cash flow with very little in payments required to offset them. We are seeing this work very effectively in building industry businesses in trouble. In ramping up progress claims fast we usually find that the smaller the job the shorter the lead time to commencement of the job. We therefore look for balance between smaller jobs and larger jobs to ensure we have jobs which we get underway quickly as well as the larger jobs which give us larger deposits and check measures but take longer to commence.