E X A M P L E S
Mechanics / Electricians / Plumbers / Drain layers / Machinery operators /IT Services etc
C O R E B U S I N E S S M O D E L S
Hire experts/technicians, charge them out for more than what you pay them to cover overheads and profits. Add products onto your services that you on-sell for a margin.
I N D U S T R Y D E S C R I P T I O N
The Trade Services sector is very broad and covers various sectors such as all the building and construction trades as well as automotive services etc. Operators can have either a business-to-business service or a business-to-customer focus and many operators have both. Business success and scope for growth is largely linked to how the owner views their role. They’ll either identify themselves as someone who is on-the-tools or, as a manager/director who’s job is to provide sufficient work to their team and then make sure it’s done to an acceptable standard with a profitable outcome.
L I F E C Y C L E
A typical life cycle for a Trade Services business is often beginning as an individual that breaks away from a larger organisation by taking a few key clients with them. Alternatively they are started from scratch or purchased from a retiring business owner. How far the business expands will depend on the interest and intentions of the owner to add a team. Often this will depend on what size of job or type of customer has been secured. When larger jobs or customers are added, this will often trigger the need for more staff. Trade Services businesses get into trouble when they “gear-up” for larger jobs and/or customers, but find difficultly in maintaining workflow when larger jobs finish or when key customers switch to buying from a competitor.
C R I T I C A L I S S U E S
When this happens the additional staff and associated equipment becomes an overhead that doesn’t have the revenue to support itself. Many Trade Services business owners experience this issue where they don’t want to let go of staff and equipment (because finding good staff is difficult, training takes time and equipment has often been purchased on credit) but they can’t find sufficient work to utilise the capacity they’ve created. Many businesses can last for a while like this by adjusting their pricing on quotes to “feed the business”, but eventually realise they were making better money when the business was smaller. Hence some operators end up going back to the cycle of “do the work” then “chase the work” and being on the tools. Many trade services businesses stay at the 1-3 staff level when this is the case.
S C A L E M O D E L
If the business gets sufficient workflow by niching or successful prospecting, they will begin the process of scaling up. This usually starts with splitting their workers into more teams and allocating a team leader or foreman. Admin support can also assist for invoicing, scheduling and maintaining “jobbing” systems. Many business owners hesitate to expand their businesses when they experience staff recruitment and retention issues or suffer from debtor management issues.
W H E N T O G E T H E L P
Owners of Trade Services businesses will tend to need help from a Business Advisor when they are either too busy and therefore need help to coordinate and improve the productivity of their team, or too quiet where they’ll need direction on how to break the cycle of “do the work” then “chase the work”. Typically we assist Trade Services businesses with an initial assessment of the capacity currently being utilised. Then we’re able to assist on how to optimise the current workflow before engaging in sales and marketing activities to drive profitability.
G R O W T H P A I N S
Trade Services businesses struggle when they have insufficient work whereby they need to work on marketing and sales systems for the right type of work or customers. Alternatively they’ll have too much work whereby their marketing needs to focus on attracting people to work for them (as opposed to marketing for customers, they’re effectively marketing for staff).
B E N C H M A R K I N G E X A M P L E S
Check out the details below and think about how you’d compare your business to the data referenced here.
AUTOMOTIVE REPAIRS
DEFINITION
Motor Mechanics as persons mainly engaged in repairs, maintenance and vehicle testing of engines and related mechanical components
OVERVIEW
Within this industry motor mechanics are employed in a number of differing work environments, the primary employers being general mechanical repair shops (including mobile repair shops), specialist repair shops, service stations and motor dealerships. Research also pointed towards a significant growth in franchised dealerships which specialise in particular models of cars. The increasing demands that have been placed on the skills base of motor mechanics have resulted in a move towards the specialisation of services provided by motor mechanics. These niche markets include areas such as electronic fuel injection and tune up, steering and suspension, automatic transmission, brake systems, exhaust systems and electric cars.
BEST PERFORMERS
The challenging economic conditions in which businesses now operate requires owners and advisors to carefully examine business performance with regard to profit drivers, expense structures and their competitiveness in the market place. The following differentiators are what the top performers are doing:
Manage work in progress
Review pricing strategy annually
Manage debtors
Regularly monitor cost of production
Improve staff productivity
INDUSTRY SPECIFICS
The following have been identified as the specific differentiators of the high profit / high performing businesses (top 25%) that set them apart from the low profit businesses (bottom 25%)
Employees’ wages & salaries as % of income
Total Income per Fee Earner
$130,242
$225,526
Total Personnel
3
4.4
By employing more people, the higher profit businesses are able to undertake and complete more work, generate more revenue from employees and spread their overhead over more chargeable hours.