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Tips for Tradesmen – 6 hurdles to winning bigger contracts (and how to overcome them)

Have you ever wondered why some trades businesses get the big contracts with local authorities, schools, house builders, retail or hotel chains etc?

Whether it’s planned and preventative maintenance of electrics or plumbing, painting and decorating or landscaping, these big contracts can make a huge difference to your cash flow and bank balance. When it comes to bringing in more profit and having a steady stream of work, they can go a long way to helping stabilise your income.

So, why isn’t every trades business chasing these bigger jobs? The truth is, they rarely land in your lap without a bit of work on your part.

When we asked our network of plumbers, electricians and builders what’s stopping them going for the meaty contracts, these same six reasons kept raising their head. To be honest, none of them need stop you if you want to go for it and transform your business!

Your services are in demand – you just need to work at winning the right kind of business.

This is why we’ve put together our guide to overcoming the six common hurdles to winning big contracts.

1. You’ve never been through a tender process before and don’t know where to start

The number one reason for not going for potentially lucrative contracts is – the tender process. What most of these contracts have in common is, you have to fill in a bit of paperwork and jump through a few hoops to win them. For bigger companies with admin or sales staff who are a dab hand at putting the required information together, that’s no problem. For someone who’s never entered into a tendering process before, however, it can be pretty daunting.

But, you’ll never get anywhere unless you dip your toe in the water and have a go!

Have a gander!

Download a few tender application forms and familiarise yourself with the common questions they ask, the criteria they set and the information they ask for. Many follow a similar pattern so, once you’ve gathered the information for one, it’s then not a massive stretch to apply for more.

What are you lacking?

Once you’ve read through a few, make a note of any issues you think you’ll face. Do you have the skills, tools and manpower you need to fulfil the contract? Are they asking for accounts information you don’t have readily available? Are there any certificates or accreditations they require that you haven’t got? We’ll look at overcoming all of these in a minute! But it pays to know what you think you’re lacking so you have an idea of what you need to improve.

Take a course

Like your trades skills, you have to train to achieve a standard. There are lots of online courses that don’t cost the earth that will take you through the tendering process step by step. Putting in a bit of time and effort to find out what the procurement team will be looking for, and how to make yourself stand out, will give you greater confidence in completing a tender and the best chance of success.

Here’s a couple of tendering training course providers you could look at:

www.tendersdirect.co.uk

www.tenders-uk.com

There are plenty of others out there – we suggest you do your own research and find one that suit you.

2. You don’t know where to look for opportunities

Before you can apply, you need to find these potential jobs. If you google ‘Find Tender Opportunities’ you’ll probably get a list of sponsored ads for paid-for services, offering to send you daily tender opportunities straight to your inbox.

Yes, it might save you time, but you can find tender opportunities for free. When you’re just starting out, this is the route we suggest you take.

Public sector tenders have to be advertised in a way that allows any company to find them.

This is a fairly easy and free way to check for high-value public sector tenders (OJEU tenders) advertised in the Official Journal of the European Union and online at Tenders Electronic Daily (TED):

TED: http://ted.europa.eu

For lower value public sector tenders, this UK government portal was set up to help small and medium sized businesses win public sector contacts. It now also has some high-value tender opportunities.

Contracts Finder: www.gov.uk/contracts-finder

If you did want to invest in a service that finds relevant opportunities for you, these are some of the service providers you can take a look at:

www.supply2govtenders.co.uk

www.contractsadvance.co.uk

There is a collaborative solution to paying for such services. If you have a network of contacts within your industry, it might be worth considering signing up to a service you can all benefit from and sharing the cost between you.

3. You’re just a small company – how can you compete with the big boys?

This is something that stops many smaller concerns even filling in the tender application. But that could work in your favour.

The government is committed to supporting the growth of SMEs, particularly in the construction sector. In fact, it pledged to award 33% of public sector contracts by value to SMEs by 2020.

They recognise they can receive better value for money by awarding contracts to smaller businesses and by doing so are also supporting local economies. This means those smaller businesses who do step up and have a go are more likely to be in the running.

This should give you confidence that your tender will be considered on its merits, on how well you can fulfil the job brief, rather than on how big or small your company is.

4. You haven’t got the required credentials

It’s true that there are certain requirements you will need to meet to be considered. These generally mean you have to demonstrate you meet industry standards by holding certificates and accreditations. This is the most reliable way for employing organisations to know that you, as a company:

can work safely on a project
have trained and competent staff
have a quality management system in place
work in an environmentally friendly way

It will be an issue if you don’t yet possess the required credentials.

The only way to address this is to research which accreditations you need and commit to achieving them. It will be time well invested, however, as this will generally open you up to a wider pool of opportunities.

This needn’t stop you beginning the tendering process, however. If you can show you are working towards achieving an accreditation and have an estimated date to become certified, this may well be enough to secure a project. It’s all in how you phrase it.

Convert areas of weaknesses into areas of strength.

For example, ‘We will deliver to the standard’s criteria and achieve accreditation within 6 months’ will be looked upon favourably, whereas ‘we don’t currently hold the standard’ will probably see you heading to the discard pile.

Some useful links to find certificates, accreditations and memberships you might need, depending on your area of expertise and the projects applied for, are:

5. You don’t have the manpower to fulfil bigger contracts

If you are a small team, this doesn’t mean you can’t consider creating a bigger project team to fulfil a lucrative contract.

There are a number of ways you could do this.

Build a bigger team of employees on a full time or project-based basis
Bring in contract workers as and when needed
Join forces with another small company and create a partnership for the purposes of fulfilling bigger contracts.

You will need to work out which avenue works best for you and your business. We’ve put together a short video on how to decide between employing staff or bringing in contract workers here.

Your accountant can go into this in more depth with you, taking into consideration your current and projected finances.

6. You need cash to invest in making this all possible

There has never been a better time to access investment cash for your business. Although COVID-19 has caused major disruption in our working lives, it has also opened up borrowing and other opportunities. Loans, tax relief and cash grants are available for small businesses and can offer that investment cash you need to reach for bigger and better contracts in your business. It suddenly makes all of the above possible.

If you’re unsure what you are entitled to, how to access the help available, or what you can invest in that will be most effective, your accountant should be on-hand to help with all of this.

Building your business and becoming ‘tender-ready’ to enable you to go for bigger and better contracts is something your accountant should be helping you with.

We help trades businesses break through barriers to win more profitable work.

If you don’t feel you’re getting the support you need to do this, book a discovery call with us here.

Tips for Tradesmen – get a grip on your business costs

We hear time and time again from the plumbers, electricians, builders and other tradespeople we deal with – cash flow is their biggest bugbear!

When we start delving into the ins and outs of their monthly accounts, however (namely what’s coming in and what’s going out), it’s often the case that they haven’t got a handle on exactly how much their business costs to run.

How can you work out what you need to bring in, if you’re not quite sure what money is due to come out each month? If you don’t know what overheads you have to cover, you can’t work out your pricing to ensure your profit can cover them.

What regular expenditure or operating costs do you have?
What will your phone and other bills cost?
Are you outsourcing services, like accountancy or admin? When are these costs due?
What consumables will you need for the jobs you have planned in?

Getting a grip on your fixed costs (that come out every month), and your variable costs (that change depending on the jobs booked in) will help you manage cash flow far better.

So, with that in mind, here’s an exercise we suggest you take time to do sooner rather than later, to help you stay in control of that irksome expenditure.

Brain-dump

Start by listing EVERYTHING you spend money on in your business onto paper. At this stage, it doesn’t matter how big or small the cost is, or how frequently or infrequently you spend on it. Just get it down in black and white!

It might help to get your last 12 months business bank statements in front of you to remember some of the things you’ve spent money on.

These are some examples of costs you might have, but it’s not the full picture – we’re pretty sure you will think of more!

Premises
- Rents and Facilities
- Utilities: Electricity, water, and heat
Van
- Lease or loan repayment
- Petrol
- Van servicing and maintenance
Insurances
- Public Liability
- Tool/equipment insurance
- Van insurance
Salaries, including your own!
Mobile phone contract
Office supplies and equipment
- Invoice / Receipt books
- Paper / Diary / Pens
- Computer / Printer / Print Cartridges
Software (such as computer anti-virus software or professional admin or accounts software)
Materials
Tools and equipment
- Work clothes and PPE
- Equipment maintenance
Professional services
- Accountants fees
- HR support
- Marketing support
Legal Compliance: Depending on your business, there may be costs incurred to remain compliant – whether that’s in updated training courses for employees, equipment maintenance and testing or trading licenses etc.
Marketing and Promotion
- Flyer design and print
- Facebook advertising
- Website or website maintenance

Don’t worry if it looks like a long list at this stage. It is essential to include as much as you can. Don’t be tempted to disregard something to try and cut costs on paper. The reason behind this is to know, as close to the penny as possible, what will be going out.

2. Categorise

Once you have a list of costs, decide which costs remain constant and which will change. What will you need more of, for example, if your workload increases?

Break your list of costs down into the following categories:

Fixed Costs

Expenses that will remain the same, regardless of the scale of project you’re working on or number of jobs being completed.

Examples might be office or factory space, van leasing and insurances, mobile phone contract etc.

Variable Costs

Expenses that change depending on the work you’re doing. Variable costs tend to increase when you’re busy and reduce when your production dips.

Examples include costs of raw materials, electricity bills, petrol etc.

Semi-Variable Costs

Costs that include both fixed and variable elements.

A common example of semi-variable costs is overtime wages. While the wages a company pays its regular staff is considered fixed cost, any payment for overtime work is considered a variable cost, as it increases and decreases with the company’s level of production.

3. Calculate

Once you have your neatly categorised lists of costs, try adding values where you can. Use the last year as a benchmark.

How much did you spend each month, each quarter or each year on these items.

4. Sift and Sort

Now you know:

What you’ve spent money on in your business and how much you spent on each item.

This is a great place to be! Now think about:

Whether every cost is necessary
- does every cost add value to your business in some way?
Whether any can be reduced
- could you get better rates for any of the services, such as your phone contract or utilities?
Whether any can be altered to make things easier for you and your cash flow
- could you spread the cost of expensive items or services, so you don’t suffer a big hit in one month?

5. Make profit!

Now you’ve got a clear idea of how much you need to cover costs, it’s easier to work out how you can make more profit!

There are lots of things to consider here, which is worthy of a whole other post. But here’s a few pointers to start you thinking.

Are you pricing your jobs correctly, taking into account not only the labour and material costs, but other overheads of running your business?
Do you need more work to fill your time and make more money?
If you haven’t got time to take on more work, why is that? Do you need to outsource more services to free up your time, or think about taking on more staff?
Are you chasing the right work? Should you be focusing on getting more of the higher value jobs rather than lots of smaller jobs?

By calculating the cost of running your business, you’ve taken the first major step to making your business more successful.

For more help and guidance on where to go from here, why not book a discovery call with Paul or Emma? We specialise in helping tradesmen make more money from their business, with less effort!

You can book a 15 minute call here.

Tips for Tradesmen – how to get clients to PAY UP!

Having loads of jobs booked into the diary and being busy in your trades business is all well and good, but if you’re finding it tough to get clients to pay – your cash flow can quickly run dry!

Keeping on top of cash flow is crucial to any business, but trades businesses can feel this more keenly as your work relies on buying in a significant amount of materials to do the job.

With better processes in place to collect in that all-important cash, however, you can find it flows into your business much more readily, helping keep you afloat.

These few tradesman’s tips could have an immediate impact in helping improve cash flow – and release the stranglehold it has on your business.

Check if they can pay!

This might not be appropriate for smaller jobs, but if you’ve bagged a big contract worth a good wedge of cash, there’s something you need to do before breaking out a celebratory beer or two.

Check they can pay!

As much as you might want to make this mega sale, if a customer is unable or unlikely to pay on time you have to ask yourself if it’s worth it. Just think of the repercussions for your business if you throw loads of money, time and effort at a job to have nothing come back.

We would suggest you conduct a credit check as a sensible precaution, or request references from other companies who have supplied them with services, before entering into a contract.

Just as a potential client might want to vet their suppliers, it’s perfectly reasonable when large sums are on the line that you also vet the client!

If you’re left in any doubt as to whether you’ll be paid, and paid in a timely manner, you have to make an informed decision as to whether to proceed.

Set out clear payment terms

This should be embedded in any tradesman’s sales process – but we often find it’s not.

MAKE SURE IT’S CRYSTAL CLEAR WHEN PAYMENT IS EXPECTED!

Including clear-cut payment terms when you book in a job will help both you and your customer. The customer will know they need to have the readies at the ready and you know when that payment should hit your bank account.

If you’re working with larger businesses, this might involve a bit of negotiation. They might expect a 60-day agreement from suppliers, for example, but if this is unmanageable from your perspective, make sure this is ironed out and agreeable terms are reached before the order form is signed.

Get it down in black and white that you expect payment within 14, 30 or 45 days of invoice depending on the agreement made, or even request part-payment up front.

If everyone knows where they stand, it should make it more difficult to wriggle out of payment when it’s due.

Send out invoices – promptly!

Do you wait until the end of the month to send your invoices?

Why?!

As soon as a job is completed, finalise the paperwork and pass the invoice for payment.

So many trades businesses put off their invoicing and do a job-lot at the end of the month but this could mean you’re waiting unnecessarily for cash to come in.

If you complete a job in the first week of a month, waiting until the end of the month to invoice with 30-day terms means you’re effectively offering the client 60 days to pay.

Ensure accuracy

Don’t give a client reason to delay!

Make sure all your invoices are clearly set out and above all – accurate. Give your customers no reason to query anything, otherwise you’re giving them a prime excuse to not pay.

Also, make sure you’re sending it to the right person, department or place!

Offer a reminder rather than chasing debts

It’s probably not a job you relish, but credit control is a necessary evil when it comes to managing cash flow. Don’t leave it until the due date (or after) to remind clients that their payment is outstanding.

A friendly reminder a week before the deadline by email or telephone can work wonders. It also stops you feeling like you’re chasing for overdue debts so takes away all the awkwardness.

An email could be worded as simply as:

Dear X,

This is a polite reminder that payment of invoice no. XXX for [details of work completed] is due within the next two weeks as per our agreed payment terms.

We would appreciate it if you could schedule this for prompt payment by the due date.

Thank you in advance and best regards,

Do you have a procedure, or penalties in place for non-payment?

You should have a procedure in place for payment – sending invoices is the most basic form of this. But what do you do when a customer persistently fails to pay?

As with our advice to set clear payment terms, we also suggest you set out in your contract terms and conditions what will happen if you do not receive payment on time.

Will they receive reminder notices?
Are extra charges incurred if an invoice is not settled within a set time limit?
Will they face legal proceedings?

Make sure these processes are in place and act on them if necessary.

Offer incentives for swift payment

Everyone likes to save money, and you can use this to your advantage.

Offer a discount for payment up-front or early payment of your invoice. You might be surprised how attractive this can be to a customer! Think about a parking ticket – do you pay within 14 days when it’s £60, or wait until it doubles?

But why should you drop your price, I hear you say?

Think of it this way. The benefits of a client paying promptly can far outweigh the small loss you make on offering the reduction. It will also save you the cost and hassle of chasing monies in the long run.

Make it easy to pay

You might prefer your customers to pay you a certain way, by bank transfer for example. But does that suit all of your customers?

Ask them how they prefer to pay and do what you can to fit in with them.

Perhaps they don’t like online banking.

Perhaps they’re a business with a payment system that isn’t in sync with yours.

Being flexible on how people pay can prevent costly delays to seeing the cash in your account. The easier you make it for them, the better it will be for you.

Do you have to wait for completion?

Do you find jobs often leave you out of pocket?

It might be a time-consuming project, or one that has to be completed in phases.

Maybe you’ll need to invest in tools, resources, materials or even additional labour.

If this is the case, think about creating a payment plan so you don’t have to wait to complete the work before getting paid.

Ask for 50% payment up front to cover costs followed by the remaining 50% on completion. Or for longer-term projects, break down the total into a monthly fee for the lifetime of the project, rather than charging one lump sum at the beginning or the end. Paying little and often can help both parties manage the financial burden of a high-value item better.

Prepare for pinch-points

Do you have months where you’re run off your feet, but then see dips in workload at other times?

Landscaping work is in high demand in the warmer months, for example, whereas plumbers tend to be busy in winter when burst pipes and dodgy boilers need emergency attention.

Planning how to manage the low-points in terms of cash flow is vital if you’re going to survive.

Think about how you can still keep orders coming in during the slower periods.

Could you offer a promotion on certain work, for example? Or, could you diversify what you offer to fill the gap?

If none of these work for you, you need to find a way of stockpiling the profits in the good times, to see you through the lean.

These are just some of the ways you can prevent lack of cash flow gaining a stranglehold on your trades business. Most importantly, you need to manage your money and know where you stand at all times.

Get Smart Accountants specialise in supporting trades businesses to manage their cash flow.

For advice or support, contact Paul or Emma on 01902 212937.