The end of financial year is almost here

Hi [First Name],

The end of financial year is almost here. While having a tax bill is a sure sign that your business is profitable, it’s easy to pay too much tax. Its important to structure your business, your developments and your personal affairs
in the right way and put strategies in place to reduce your tax bill.

While we’ve seen construction businesses delaying sending out invoices until after the end of financial year to reduce their taxable income, this can create a significant cash gap in the business. They often then take longer to be paid and typically indicates the business owner does not have a well thought out tax management strategy.

If you have made a loss in 2012-13 it is also worth noting that you may be able to carry the loss back and obtain a refund for taxes you paid in 2011-12. (up to $1m)

Here’s Seven key areas you should consider prior to June 30:

1. Prepare an income tax estimate for the business so you can plan to pay directors fees or salaries, dividends or additional superannuation contributions based on your available cashflow and estimated tax liability. A franked
dividend can also have some tax advantages worth considering.

2. Pay all your 9% Superannuation Guarantee contributions or performance bonuses for your employees by 30th June to ensure you can claim the tax deduction

3. As a small business you can claim an immediate write off for assets worth less than $6,500. If you are considering any such purchases, prior to 30 June could be the time to take action.

4. If you have any bad or unrecoverable debts, be sure to write them off prior to 30 June.

5. Consider prepaying any tax deductible expenses for the coming year prior to 30 June to bring the deduction forward.

6. Consider realising any capital losses by disposing of loss generating assets before year end.

7. Do a full stock take on 30 June to write off any missing or old stock and ensure your balance sheet and asset register remains correct.

For 2014, here’s some other key items to review and consider for the year ahead to ensure your financial wellbeing:

1. Review how you are drawing your income or profits from your business, if it’s paid via a family trust, it can be significantly more tax efficient.

2. Consider setting up a Self Managed Superannuation Fund (SMSF) to allow you to invest in direct assets like property for faster wealth accumulation.

3. If you are doing your own developments, consider partially funding them using a SMSF, the profits that get returned to your fund will only be taxed at 15%, less than half of what you would otherwise pay.

4. Consider purchasing your own business premises also through an SMSF if possible.

5. Look at engaging a licensed Wealth Advisor to create you an integrated financial plan or blueprint that considers your company and personal income, your financial position and goals and documents your best strategy in the coming years to accumulate wealth in a tax efficient manner.

Please contact Jeremy Carter from Fusion on 1300 038 746 or at Jeremy@fusionfs.com.au for more information or to discuss any of the items above.

To your ongoing success,

Kurt

Remember to visit our new facebook page for your Free Builders Business
Checklist https://www.facebook.com/masterbuilderscoach?ref=tn_tnmn

Disclaimer: The above is general advice and may not be appropriate to your specific situation. Further analysis and a formal statement of advice will be needed before proceeding with the strategies suggested. Fusion Private Wealth ABN 46 152 465 462 is a Corporate Authorised Representative and Corporate Credit Representative of Magnitude Group Pty Ltd ABN 54 086 266 202, AFSL 221557. Fusion Accounting and Advisory is a registered Chartered Accountant Firm.

Inadequate Designs & Specifications – What do you do?

Unexpected ‘variations’ on a build is a common and often discussed frustration in our industry. Now I’m the first to admit publicly that the less I see of lawyers the better! However recently I met with an ‘industry specific’ lawyer who’s opinion I respect. He had this to say about inadequate designs and specifications;

Inadequate Designs & Specifications – What do you do?

Imagine this scenario – you are in the middle of completing a home building contract and you discover that something in the architect?s plans is not quite right – perhaps they neglected to specify an essential component in the plans, or perhaps the plans would not adhere to the Building Code of Australia/NZ („the Code?). What do you do? Should you proceed to build based on the plans and specifications? Should you alter the plans and specifications to comply with the Code?

In this scenario, the best course of action is for you to:

1. Notify the architect that the plans are inadequate and/or not compliant with the relevant laws;

2. Notify the home owners that:

(a) you do not recommend for them to instruct you to proceed with the building works based on the plans and specifications; and (b) you require further plans and specifications from the architect.

Notwithstanding the above, sometimes it is easier said than done and accordingly, we outline some relevant and very recent Consumer, Trader and Tenancy decisions:

if there is an omission, an error, or a lack of guidance in the plans, you should report same in writing to the owner and architect and await their guidance before proceeding;
if a builder proceeds to remedy gaps in the plans and specification without instructions from the owner and/or architect, the builder can be held liable for rectification costs if the remedy is defective; and a builder has a contractual and statutory obligation to build in accordance with the plans and specifications AND the building works must comply with the Home Building Act or any other law such as the Code;

Tips

Do not proceed to build if there is a gap in the plans and specifications;

Do not proceed to build if you are aware that the plans and specifications do not comply with the relevant codes of practice;

Get everything in writing as you are required to do so pursuant to the Home Building Act 1989 (Cth) and the contract.

Did you find this article useful? If so, please feel free to subscribe to Damins’ mailing list by emailing reception@mclp.com.au with the subject title “B&C Subscribe”. If you have any questions in relation to this article or their Building and Construction Law Corporate Retainer, please feel free to contact Mr Murdock on 0422 730 999.

To your on-going success,

Kurt
MASTER BUSINESS COACH
E: kurt@builderscoach.com
www.builderscoach.com

Produce Quotes That Win

I’ve had a few builders ask me about quote presentation recently so I thought I’d share some insights.

Working on tenders, producing quotes obtaining estimates from your subcontractors, it is all money spent with no guarantee of a return. It gets pretty frustrating, especially when you find out the client has punted their plans around 10 different builders. Do they think builders have nothing better to do?

You have probably heard this a hundred times before, qualify the client. But even so, you are still up against at least another two competitors. So, how do you win? Forget competing on price, if you have qualified your client we can assume they are not idiots, so the guy that forgot to add a slab into the price will not win by default.

It’s not the only factor (I always recommend a strong ‘sales process’ first), but presentation is certainly a BIG component. By presentation I mean detail, not prices (apart PC’s and PS’s) but specifications. The more you tell them about what is included in the price the MORE they think is missing from your competitors price. With margins the way they are you need to be 10% dearer than your competition and still win. It can be done.

Aim for a 30-35 page Quote Presentation. Hard work? Yes, but would you rather do a 6 page quote 5 times and still not win anything? Anyway, once you have done the first quote the subsequent ones are easy. 70% of the detail is the same; you are just tweaking the selections, PC’s, PS’s and the final amount.

This can be done in an Excel Spreadsheet quite easily, but if you want to get really clever, Co-construct will do it for you. Create a template; enter your base specifications and more importantly your exclusions (No Allowance for tree removal etc). Now add your base selections or choice of Gold/Silver/Bronze options or maybe just a PC.

Now you can use the template on every job going forward. But that’s not all, your client can’t afford it can they? So they make changes. Tweak it, print it. Tweak it print it. Tweak it print it. Finally, they push the button and you have a readymade contract addendum. The contract will take 15 minutes to fill in, the addendum is already done. What’s more, all the selections & specifications are now part of your project management system. Cloud Based Software, accessible from anywhere, every selection, every detail. Hallelujah!!

Here’s the ugly truth

A recent international study showed that less than 4% of builders and contractors make it past the 10 year mark in business. If you’re reading this, congratulations you’re probably in that 4%. The hands down number 1 reason for failure is no surprise, poor cash-flow! When the money stops, the business ends.

Lets look at the six main reasons builders and contractors suffer from poor cash flow;
1. not charging enough for their work
2. failure to use or incorrect use of variations
3. failure to use or incorrect use of legal contracts
4. too many employees for the volume of work being produced
5. Too few payment schedules on their contracts
6. lack of profitable jobs

Now I could go on for days talking about the importance of having adequate financial controls, knowing your Breakeven Point, having the correct pricing strategy, eliminating inefficiencies etc. The reality is I’d be wasting my time if I didn’t first make sure you had the “Leadership Mindset” to make it happen. If you’ve found yourself going around in circles for years, perhaps its more about what’s going on in your head than anything else.

Most of the builders and contractors I’ve worked with have strong egos, are independent, and want to be self-directed in their business. I might even accuse some of being stubborn, myself included! This is neither good nor bad, it’s just the way we are. It gives us the go power that we need to make things happen. However, it can also work against us.
I had a builder come to me recently asking for help with his business, work was drying up and he wanted me to help him with his marketing and advertising. Before we got started I wanted to check in with him and see if he had the right mindset and an open perspective. If you’re not open to new information, you learn nothing!

The first sign that something was wrong was when he started debating everything I said. Now I’m not a genius by any means but having studied Marketing on three continents and worked with hundreds of builders and contractors 1 on 1 qualifies me to have an opinion on the subject.
For the duration of our conversation he sat there with arms folded resisting any new idea I put forward. Not surprisingly when I followed up two weeks later to see how he was progressing with the Marketing projects we’d discussed, he hadn’t done a thing. And of course when I asked him why, of course it was my fault!

Although Profit and Cash Flow are our highest priority with all our clients, without the right mindset or attitude its impossible to achieve a result with any business.

From a leadership perspective, you need to take ownership of your business and your business education. If you don’t who will?

This includes becoming more self aware and making the necessary changes to a become a better leader and businessman. Ultimately this is about thinking differently and developing new “habits”. The specific changes you need to make will differ depending on what habits you already have. When breaking bad habits or developing new positive ones you need to follow the 30 day challenge i.e. 30 days to break a habit and 30 days to form a new one.

Time management and financial management are two critical “behavior change” areas which we always looked at first. Everyone can improve their time management; the majority of builders and contractors in this industry need to dramatically improve how they manage their financials. If you and I were going to invest in a business together, here are the business basics that I would expect you to have:

1. An open mind and unyielding commitment to your own leadership growth and personal development
2. an understanding of “Sales process”
3. a commitment to education
4. an understanding of mark-up, gross margins and breakeven points
5. a readiness and willingness to do whatever it takes to get the job done

Make sure you’re not like the pigheaded bloke I met a few weeks ago and and stay “open” enough to enjoy the business success and lifestyle you deserve.

Your Price is Too High

Do you have clients tell you “your price is too high”? I have a lot of builders tell me they are getting this feedback even though they know they have cut the quote to the bone.

Do your clients really know one way or the other if your price is too high? “Your price is too high” is a tired old line that your customers have been trained to use to get you, the builder, to pull back on your margins. They have been told by the media, their neighbours, someone at work, their family, whoever, that if they tell you “your price is too high”, you will, in all likelihood, change the quote to some lower number.

I have a friend who does this regularly and says he’s surprised how often people do it, even the major chain stores. I decided to try it recently at a rebel sport store at our local Westfield and they asked me if a $30 discount would be ok? So I know it works and I’d recommend it IF you are the customer.

Lowering the price to win the job is exactly what most “order takers” will do. An educated builder knows better and does not lower their price, unless the client changes the job.

Now you might be saying to yourself, ‘but I know my price was too high because the client told me I came in above the other two quotes!’
“Your price is too high” (and that statement can come in a number of different forms) simply means that you have not done your job as a ‘salesperson’. Plain and simple, you have been lazy and have missed some very important steps in the ‘sales process’.

The number one rule for sales is to ‘qualify’ your prospect. You need to pin down the budget to the point that you know exactly what they want and are willing to spend.

Here are the four essential questions that need to be answered;

1. What do you want to do?
2. When do you want to do it?
3. Who will make the buying decision?
4. What does that person(s) want to spend?

If you get the answer to (at least) those four questions, you will get to a “yes” much quicker. Sticking to and getting the answers to those four questions will help you qualify your prospect and save you a world of pain in wasted time and energy down the track.

Over the years I’ve compiled a list of the most affective qualifying questions a builder can ask. Click here to download them now. Knowing the answer to these questions will take your sales conversion rate from 1 in 6 to 1 in 3 very quickly, without lowering your margins. Learn the technique, ask the questions, get the answers and watch not only your sales increase, but your profits increase as well.

To your ongoing success.

Kurt

MASTER BUSINESS COACH
E: kurt@builderscoach.com
www.builderscoach.com