Simplex Open House

Saturday, January 3, 2009

7 BUSINESS BLUNDERS TO AVOID IN 2009

Avoiding mistakes can save you both money and a headache. If 2008 hit your business hard, not doing anything to avoid a major blunder in 2009 could prove disastrous. Here are 7 things to be aware of this year.

NOT KNOWING YOUR LOCAL PERMIT AND BUILDING CODES

Just a sure as the sun will rise; local agencies will be changing some of the rules for 2009. Consultants and code enforcement people love writing new codes for people’s protection. Damned be the costs. Fire retardant regulations may require you to add sprinklers to more of your projects. Keep an eye on green building and don’t get caught using a high VOC paint if the local codes have been changed with green in mind. It will be tougher to get a building permit this year.

NOT KNOWING YOUR COSTS

If 2007 and 2008 taught us anything but watching our costs, then it wasn’t all bad. One of the greatest strengths of going modular for 2009 is that you know your costs on almost 80% of your project before you start. How great is that! And when you figure in that the factory can get your house Energy Star ready and Green certified and engineered, you’ve just got to be giddy about the tight money control you’ll have.

HIRING THE WRONG BOOKKEEPER

Keeping a tight rein on your finances and hiring the right bookkeeper to guard them is paramount.

My father and I owned a grocery store when I was growing up. His bookkeeping system was unique. I called it the “Two Lard Can Accounting Method.” All week long he would put the daily invoices into the first lard can (these were big drums that lard came in for our deep fryers) and then on Sunday evening he would start pulling out the invoices, put each supplier’s bills together and write them a check. He then moved the invoices into the “Paid” lard can.

Then he would take all the employees time cards out and pay them. If there was any money left over, he paid things like the rent, taxes and utilities. And if there was anything left after that, he left 50% of it in the checking account and paid himself the balance. He knew EVERY Sunday night where he stood.

Today you use things like QuickBooks to do your bookkeeping. But here is the rub, if you don’t use it yourself, are you sure your bookkeeper is entering things in the right way? If you’re hiring a bookkeeper this year, take the time to find out if they know what they are doing. Have your accountant sit in on the interview. A bad choice can cost you hundreds of thousands of dollars. OOPS!

FORGET BULK MAILING

Being a small builder has many advantages. You know your market area and the types of people that live there. You can make decisions without consulting a committee and change supplier and subcontractors without needing a purchasing director. But the one thing that you can’t do is use a company to supply you with 5 -15,000 names for you to send mailers about your wonderful business. When you add in printing, postage, ad copy and the other related items including your time, you’ll quickly realize that you’ve spent about a $1 apiece to mail them. And if you get even one sale from it, I’ll buy you dinner!  Be creative and find ways to reach your target market without costing you an arm and hammer.

NOT GETTING MONEY UP FRONT

You say that your time is valuable but yet you work with people designing and drawing their homes over and over and never get anything for it.

If I wanted a new house and found out that you would work with me as many hours as needed and draw and redraw my dream house and price and reprice it until it no longer looked what I originally wanted and you never wanted any money up front, guess what? You’re my new best friend! And if you said after 20 weeks of not liking anything you did for me and asked for a retainer, all I’d say is “Good Bye”.

Tell your prospect at the FIRST meeting when you'll need a deposit to have the house drawn for costing. $500 to a $1,000 is usually enough to weed out the tire kickers and if they give you the deposit, they’re yours to lose.

NOT HAVING AN IRON CLAD CONTRACT

What can I say? It only takes one customer to sour you on the building business. Going to arbitration is not fun and sending responses to your state’s Attorney General is a real downer. So how do you avoid it? Have a tight, tough contract with your customer. Lord knows that they will find something wrong with the house, even if they were your best customer during the process. I had a contract written that some builders thought was so tough they said they wouldn’t use it in their business but soon I was being asked if they could! Somebody must have rained on their parade. I even have a clause about children visiting the job site and another about taking pictures after closing.

DOING BUSINESS WITH FAMILY

I made the mistake of building a house for a member of my family. Not always a good idea! And being a newbie at business, I didn’t understand the value of outlining my role and responsibilities to the tee, to make sure if something goes wrong, there’s something to refer to IN WRITING. I have since learned the error of my ways and treat everyone alike and I used the tough contract mentioned above. Happy Days again!

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