Last month we opened the topic of building your business by expanding your work force rather than just doing more work yourself. But before you start handing out job applications, you had better take care of some homework. Building a team and delegating tasks means you must take the time to figure out what to delegate. How do you make time to plan the future when the present has you covered up?
It Takes Money To Make Money
How many times have you heard that bit of wealth-building wisdom? How many times did your banker make the quip while filling out your application for a credit line? From your banker’s perspective, money lets you buy more capital for your business. For the “favor,” your banker brings in some nifty interest payments. The banker’s money is in fact making money for the bank.
For you, however, that money could simply be making more work. Interest on loans must be paid, so it is extremely important that the loan money becomes productive and profitable as quickly as possible.
But there’s another hitch to that loan: What if the payment schedule doesn’t match your cash flow schedule? In the contracting business we often have chicken one day and feathers the next. Most bank notes don’t understand that ebb and flow, forcing you to discount jobs just to keep some cash flowing. You may have to put in extra hours, when the work is available, just to get ahead.
This is the paycheck mentality dragging you down. The banker is correct about one thing: The bank’s money is making money, just not necessarily for you. You may still see the need to leverage your assets, but before you kneel at the banker’s desk, there’s one more thing you need to know about borrowed money.
Time Is Money
Another well-worn business saying, “time is money” is usually used in the context of efficiency. For those of us who were taught the value of labor-saving tools and devices, “time is money” means we should invest in tools and gadgets which reduce the amount of time necessary for a given task. What this really means is that we’re buying more work. Having the right tool for the job is important, but if that tool results in ongoing debt service, it had better be highly productive. Otherwise, you’re still on the paycheck treadmill.
Let’s turn the phrase around: “Money is time.” As a business person, you need time in order to think, plan and dream. If you’re too busy taking care of business, where will you find the time to develop it? Can you afford to just stop everything and focus your vision? It takes time to define what your business should look like. It takes time to figure out what sort of customer you should serve. What sort of employee will fit in with your business vision? What goals should you give your employees? It takes time to find employees.
It’s very difficult to work on such high-minded tasks while taking care of the day-to-day chores of running your business. What you need is time - hassle-free time to focus on building your business. How much time can you buy with your money?
To put a face, and a price tag, on how much thinking/planning time you have, we’ll make up a one-truck shop - perhaps not too different from what you have right now. First, let’s tally your monthly expenses. It doesn’t matter whether they’re business or personal, just add up everything that you would have to pay for even if you didn’t do a minute’s worth of work. Bass boat, backhoe, insurance, house payment, truck payment, advertising, utilities, etc., are all checks that you’d have to write at least once per month. Let’s say it adds up to $10,000.
Next, take a quick look at your bank balance. If you have $30,000 in the bank, you have about three months’ worth of time where you could comfortably focus on the vision of your business. If you have $5,000 in the bank, you have barely a couple of weeks for business focus.
Many, if not most, small PHC contractors don’t even have a week’s worth of “time” in the bank. Their checkbooks work more like a nozzle than a reservoir. As cash comes in, payments go out. You need to buy some time, but how can you do it if you don’t have the time to stop and think about it? To begin with, you’re going to have to make time somewhere to figure out how much it would cost to operate the business you want to own (which we presume would be better than the one you have right now).
In my experience, facing these costs almost always results in a substantial price increase, especially when a profit is calculated. (In this month’s column we’re not going to go into detail about how to arrive at a profitable selling price.)
With new, and we hope more profitable, pricing in place, you’ll probably find that you’re bringing in more money for the amount of work you’re doing (even if you haven’t yet hired the new employee). This is progress but remember, the goal is to build up some “time” in the bank so you can invest some brain power into your business. When you bring in more revenue for less work, you have time to examine, study and plan. Regardless of your costs, if your customers seldom turn you down on price, then it’s time to raise your rates, even if you do it twice in the same month.
At some point, your cash coming in should exceed the cash going out by enough that you can start “coasting” a bit. Instead of working all the time, you can turn down a few jobs and take some time to think. With proper price management, you may find the sweet spot where a few customers refuse your higher price but your other customers more than make up the difference by paying the price. Your money is beginning to work for you as it buys you more time.
But don’t squander the time. Invest it in developing a vision of your business. Don’t focus on all the production skills you have. Instead, focus on just the production skills you can coax out of employees who may not have the broad background that you have. This will result in a more focused, more efficient business model with potential for growth.
You may not get huge blocks of time where you spend a week or two just staring at the ceiling, contemplating how life ought to be. More likely, you’ll be able to scratch out an hour or two per day where you can read, make some notes, talk with other business people and just learn more about your business. It’s much easier to focus on these business-building basics when you don’t feel compelled to take every job for any price you can get. Focus on buying time with the profits you earn.
How valuable is your time? Pick any millionaire you like - Bill Gates, Mary Kay Ash, Truett Cathy, Frank Blau. Did any of these people become millionaires because they could work more hours than you? I don’t think so. These leaders built empires because they took the time to think, plan and imagine what their businesses could be. They took the time to turn problems into opportunities.
Time is money. Get more of it.