Operating systems and processes, do you have them? Or do you feel a bit clueless when it comes to systems for your business?
For anyone that wants to grow their construction business then getting your operating systems and processes in place is essential. Most of us know this but it can seem complicated, and if you don’t do it right the fear is that you could end up in more of a mess than when you started.
Enter the Develop Coaching Guide to Construction Operating Systems & Processes.
In this article I am going to show you how to sort out your operating systems in 3 steps so that you can:
- Get your business running as smoothly as possible
- Make sure you aren’t missing out on sales
- Have a clear understanding of your buisness finances
So grab a cuppa and let’s get started on putting your systems in order so you spend more time on things that will really benefit from your attention, like growing your business!
Before we get stuck into the process, what actually are operating systems? For such a big-sounding word, they are not as scary as they may sound. They are how you operate at work, the methods and systems you put in place that can be repeated again and again for a specific task. It’s the way you do what you do. When you are a one-man band or an owner-worker, you will often have these systems in your own head.
For example, when quoting for work you may have booked an appointment in your diary, visited the client, typed the estimate and then sent it out. A week later you remember you haven’t followed it up so you give them a call or drop them an email. This is a system of working or your business operating system.
But should there be more structured operating system in place?
You may not realise it yet, but you will have a way of operating or a system of work for almost every task you carry out: estimating, invoicing, paying bills, carrying out the work, etc. Whether these operating systems are effective or not is another matter. One important question to ask yourself is: if I had a bad accident and was laid up in bed for a few months, could a new hire come in and immediately understand the way I do things? If you answer that honestly, it’s probably a no – This could be a problem and that’s why it’s so important to systemise everything you do.
The importance of operating systems and processes in your business is vital as you start to grow. The danger is that many owners are so busy working and expanding that they don’t have time to think about analysing and documenting their systems. A word of warning: if you try to expand your business without putting systems in place, you will be in for a painful ride. You’ll be stressed, overworked and exhausted. The whole purpose of growing is to give you more time and less stress. This can only be achieved if you have excellent systems in place.
In my own business, I saw the wisdom of having strong systems early on. At one point, I had over thirty subcontractors out on different sites all on a daily wage. It used to frustrate me each morning that we had to ring around every single subcontractor to see if they had turned up on time. It was such an easy system for the subcontractor to manipulate; they’d just not answer their phone or call back later saying it was on silent, and I would have no way of knowing whether I was being played or not. This caused no end of stress and I became distrustful.
So I put a simple operating system in place. Each employee had to log in when they arrived on the site and when they left. The login on their mobile was GPS-enabled so they couldn’t do it while lying in bed. This was a simple system that saved me about thirty minutes each morning that I’d previously spent calling everyone. It paid for itself within a month. Less stress for me, giving me more control and more time to focus on more important things.
Another business owner, Charlie Mullins of Pimlico Plumbing, calls his operating system the Pimlico Bible, which sets out precisely how all engineers should work, dress and conduct themselves. Nothing is left to chance. Although this may sound controlling, it’s how he has been able to expand so efficiently and with huge profitability.
So you can see just from these two examples that if you want to expand and grow your business you need strong operating systems in place. So let’s now take a look at the fundamental areas you need to be developing operational systems for.
There are three basic areas that are key to establishing your operating systems:
- Sales and marketing
- Finance and Accounting
Now, this doesn’t take into account other areas like HR and IT, which may be important for your construction business especially if you run a larger company. But ensuring these three areas run smoothly is a great place to start. Having a coach help you access these areas can make the process go much easier. If you are looking for some guidance then I am happy to set up a call with you here to see how Develop Coaching can help your construction business.
If you are not quite ready for that and would like to give it a go yourself, then read on for some more information about these three operating systems.
First, we need to create systems to track whether our operations are running smoothly and consistently. You can use simple spreadsheets to do this, or cheap off-the-shelf software. The important thing is that you have something in place to track the following for each project:
- Job description and category
- Original cost
- Extra costs requested by the client
- Running cost of labour
- Description of the work subcontractors/workers are assigned
- Running cost of materials
- Materials having a unique order number
- Length of project – predicted and actual
- Overall profitability
The above may sound basic but I notice that almost all of my new clients are missing some or most of these fundamentals. Do you know what is your most profitable category of work? This is one of the most important questions you should be asking yourself. If you know what service category generates the most profit you should be spending all of your time trying to win that type of work.
Conversely, what’s your least profitable category of work? Is it time to ditch that offering if it’s not bringing in a decent profit? These questions can only be answered accurately if you have the relevant data available, which you collect by tracking each project. When you’re preparing a tender or pitch for a new sale, you should know exactly what sort of profit margin you are going to have before you even start the project.
By tracking all projects consistently you’ll end up with valuable data that can tell you instantly what the average cost of labour and materials should be, how long the project should take, and what profit you will likely earn. Not only that, the above system helps with tracking your suppliers. Are they overcharging on certain items? Are you being billed for stock that you haven’t received? When you assign unique order numbers to each project and every order that is made, it’s easy to reconcile this when the supplier invoice arrives. If you receive a bill without an order number, you can reject it or investigate further what it relates to rather than blindly paying it and assuming someone must have ordered it.
When it comes to Sales and Marketing having a strong CRM system in place is key. A CRM system will keep track of the data for every person who has ever contacted you; all your interactions, phone calls and emails that you have with that person will be stored and tracked. Every time you speak to a client (potential or existing), you can learn something new and potentially that could be of value. A CRM system will store that information.
There are lots of companies that provide off-the-shelf CRM systems, and they are not difficult to use. The current market leaders are Salesforce, but there are many out there to choose from. They will also offer lots of add-on products that may be useful, like marketing and accounting, but for now we’ll just focus on the standard models.
Here is a brief summary of what a CRM system can do for you:
- Stores all customer data
- Notes how a client originally found you (useful for analysing marketing)
- Stores all interactions
- Defines the sales process
- Books appointments
- Provides reminders to follow up on sales calls/appointments
- Analyses opportunities and forecasts future sales
- Provides reports and dashboards
This is only scratching the surface, but as you can see, having all this data to hand and a systemised process for tracking sales is extremely valuable. If you haven’t got one yet, sign up to some software right now, as without a doubt you will be missing out on sales. Not only do you need a process for tracking sales, you should also have one for simple things like taking a sales call. Provide your receptionists with a sales script and flow chart for calls so they can qualify leads efficiently and have a variety of answers and scenarios prepared.
It goes without saying that you need a robust system in place for accounting; this goes for a person with £100k turnover let alone someone who is trying to break the £1m barrier. Time and time again I’ve had business owners tell me how much money they think they are earning, only to be shocked at the end of the year when a huge tax bill or VAT bill catches them completely off guard and messes up their cash flow.
There is no need for this; with all the software available now, you should be able to see a snapshot of the health of your business and liabilities owed at any time. Fortunately, there is an abundance of cheap software out there that can track your invoices and accounts.
One I’ve used for many years is Xero. It’s completely cloud-based, which means you can create invoices, see what bills you owe, and view reports on the go wherever you are in the world. It’s not enough, though, just to have decent accounting software. You need a written system of how it should be used.
Asking yourself these questions can help you write a clear system that anyone in your company can follow:
- When will I invoice for a project stage?
- How will I mark off that I have invoiced a project? (You would be surprised how many jobs get done for free because this gets forgotten)
- What payment terms will be given to clients?
- When will we chase overdue invoices?
- What is the procedure for chasing debt?
- When is it escalated to legal letters? When will suppliers be paid?
- How do we reconcile supplier order numbers to ensure we have received the correct goods?
This is not an exhaustive list, but by working through these questions and formulating your own answers, you should get a decent accounting system in place.
Now that we have seen the importance of each of these systems, and also some of the ways to implement them in your business, now is the time to take action. Don’t wait for the perfect time to overhaul your systems, book it into your schedule this week.
Like Charles mentioned earlier, develop your company bible and make a record of the step-by-step instructions for your core tasks in the three main areas of Operations, Sales and Marketing and finally Accounting. This will give you time to step away from the business and ease your stress levels, as you can be confident things are running exactly as you want and expect them to be.
Even with all the systems discussed in this article in place, you may still notice mistakes creeping in. Use these mistakes as opportunities to re-analyse and improve the systems and eventually you’ll have something watertight.
So now you have the basics of operating systems make the changes today. If you would like more help on how to scale your business then get in touch with me about my Develop Mastermind course. It is designed to help high-growth construction companies with a current turnover of at least £250k per annum to grow to between £1,000,000 – £5,000,000 of sales.
Or download a copy of my #1 book Building Your Future to get more tips on how to grow your business.