Case study: Challenges Faced by Tim, a Plumbing Business Owner

Hi, welcome to this week’s episode of Nail the Numbers. Excited to talk to you this week about Tim. So last week we talked about Steve. So Tim has got a little bit of similar problems, but he hasn’t been in business for as long as Steve. So we’re going to look at things from his perspective and see if maybe that’s something that you can relate to as a business owner.

My name is Kerry Postel. I have the pleasure of owning Abacus Business Solutions and we help businesses to know, understand, trust their numbers and also to increase their profitability as well. Being a business owner is stressful. We all know that there’s the ups and downs, but you only see all the good stuff on the social media and nobody talks about the other side of business, the other side where people are struggling with. And that is the stuff that we talk about. So being in business is great sometimes.

Other times it’s stressful. You’re worrying about money, you’re worrying about employees, you’re worrying about sales. There’s all these different things that you’re juggling and it can be really overwhelming. And that’s kind of position that Tim is in that we’re going to talk about today. So Tim has a plumbing company and he is juggling cash flow. So he has been in business for three years and at the moment he is growing the business. He’s running the business on a day to day. It’s just him and he just feels like he is wearing a million different hats.

And so he feels that it’s just so overwhelming. He’s getting burnout and he is just feeling that he just needs to take the next step, but he doesn’t know what that looks like. So he’s working long hours. He’s working evenings. He’s servicing customers during the day. He’s trying to then schedule the next jobs in the evening. He’s trying to order materials. He is just nonstop. Now on the weekends, it doesn’t get any better.

So even though he’s working all these long hours, he is struggling to pay himself, you know, purchase those necessary materials. And then those unexpected expenses come up. You all know about those. That is what happens all the time. And that is stressful. And then the next thing is he wants to grow his team. He doesn’t want to keep being just him in the business. He wants to be able to hire other people to work with him, help him to be able to take the business to the next level but he’s wondering if he can afford to take on another team member and start building a second crew at the moment. So let’s talk a little bit more about Tim. So his struggles are he’s had rapid business growth, which is great, but you know, business growth is awesome.

But then you tend to have these other expenses that all come along with that. So he’s trying to balance that increased demand of business with the available funds and trying to figure out, okay, how do I grow to the next step and afford to pay someone when I’m struggling with where I am now? And then knowing what his future cash flow needs look like as well.

Like Steve, Tim is also struggling with clients not paying him as quickly as he would like to. So he’s got this prolonged gaps between service completion and getting payment for those invoices as well. So that’s a challenge in itself is trying to figure out how do I figure out what this gap looks like and what impact it has on my business as well.

Time management. So like we said, Tim is working really long hours. He is juggling field work. He’s juggling the logistics, managing the business, and he’s also doing all the bookkeeping as well. So he’s trying to keep his numbers up to date and straight so he can see how the business is performing. But he’s got limited knowledge on his QuickBooks and he doesn’t really understand how QuickBooks works.

how it helps him, where he puts different numbers. And so he’s just kind of guessing a little bit and isn’t really sure if his reports are telling him the information that he needs to know. So he is concerned that, okay, great, I’m running these reports, but do they really mean anything? Are they really telling me the true financial position of my business? And then also he has limited time to focus on planning the next stage of his business. How does that business growth work? What does that look like? And what do I need to do to achieve that?

So he’s got high, he’s at high risk of burning out due to all these different things that he is trying to do. So because his books aren’t always up to date and because they, he doesn’t know if he’s doing everything correctly, he is worried that the numbers aren’t actually correct. And so he’s like thinking like, okay, well, can I plan based on these numbers that I’m getting? Does it make sense? You want to hire somebody else right now? He doesn’t know if the numbers are telling him that or not.

And then he’s struggling to plan for those future expenses. Like, okay, if I’m going to hire another team member, then okay, I need another truck. And then I’m going to need this piece of equipment and all these other small tools as well. So there’s lots of other things that he is trying to figure out what that looks like. But he’s a plumber by trade. He’s not a financial expert. So he’s got this limited knowledge of how to deal with this on the financial side. So that’s Tim.

Does that sound like you? Does that sound something like you? Maybe not everything that Tim’s going through, but maybe there’s certain parts that you can relate to that you’re like, you know what? That’s me. That’s why I can see my business going. Maybe you’ve been in business for about the same time and you’re now looking to grow your team as well. And so maybe those different areas strike a chord with you as well.

So what are the solutions for Tim? So like we said with Steve, adopting the profitability accounting method. So allocating a certain percentage of revenue to separate your profit, your taxes and your expenses. So this is following the profit first method. And that is one of the things that we teach. So looking to help you separate your money. When you have one bank account, you have everything sitting in that one bank account, it’s really easy to spend money that is really not there to be spent. For example, maybe you have rent coming up, maybe you have a truck payment coming up.

You’re looking to start a big job in a couple of weeks, maybe you got paid a deposit and the money in the account right now is meant for the materials on that deposit and not for anything else. But when everything is in one bank account, it’s really easy just to go and think, okay, great, I’ve got thousands of my bank account, I can go get this, I can do this. And then suddenly in two weeks time, you realize like, shoot, that money was meant to buy materials for the job I have to start next week.

So we will talk about how we can separate all the money and we tell every single dollar in your business what its purpose is. What is that dollar meant to be used for? Is that dollar for saving for future payroll? Is that dollar for paying the rent on the warehouse next month? Is that dollar for the truck payment? Is that dollar to pay myself? Is that dollar to save for taxes? So we can have lots of different bank accounts where we’re allocating money to what its purpose is for.

For example, in my business, I have 15 bank accounts and I’m not suggesting that you need that many, but it’s grown over time. I didn’t have that from the second that I implemented Profit First into my business. It’s grown as I’ve got used to the Profit First way of doing things, how I allocate money to the different resources. And then as things come up, I’m like, you know what? I need to start putting money aside for that account, for that purpose. For example, we do conferences and travel throughout the year. So I have a separate account for that.

We have a separate account where we’re putting money aside for future equipment. So we use laptops in our business, they die. I don’t want to be unprepared and suddenly a laptop burns out. I’ve got to get that replaced for my team member right away. I have money set aside for that already. So when you’re actually taking one step ahead of your money and actually telling where it goes, it gives you a huge piece of mind because now you’re not running your business just based on all your money being in this one pot. We’re separating it out and actually telling the money where it’s going to go. And one of the most important things of that aspect is putting your profit into a separate account. You don’t want to just spend it on stuff because before you know it, then it’s gone. We want to make sure that we’re very strategic on what we’re doing with that and where that profit comes from and where it goes to. The next thing I would talk about, Steve, is improving invoicing and payment collection as well. So make sure that you have a system set up. So with Tim, we would make sure that, okay,

How are you sending invoices out to clients? Are they being emailed? Are they being given at the end of a job? What is your system then? Are you making it easy for your customers to pay you? Do you offer different payment solutions? Is it easy for your customer to go online? You might find with certain customers, they’re like, just give me an online link, I’ll go pay you right now. You’ll have other customers that will get the checkbook out and they’re gonna write you a check and give it to you, and that’s fine. But make it easy for your customer to pay you.

But at the same time, I’m also not suggesting that you have half a dozen different ways where people can pay you. There’s all these different methods now. You’ve got your Venmo and your Zelle and PayPal. It’s your business. You decide how you get paid. But make sure you have that online option, which can be QuickBooks Merchant Services, for example, is what we use. And this just makes it easy for customers to pay you. But it also then matches that payment to the invoice in QuickBooks as well. 

So that way it helps keep your accounts receivable up to date and you know who owes you and who doesn’t. You want to make sure you’ve got payment terms that are clear on your invoices and clear upfront as well when a customer first decides to go with you. So if they’re going to pay you a deposit, make sure that they’re aware of when the balance of that payment is due. Don’t let that be a surprise for them when you turn up for the job and all of a sudden you’re like, hey, I need the balance. And they’re like, I thought I was going to get 30 days. Make sure they are clear. Set those expectations so that they know what to expect.

Another option is to offer an early payment discount as well. I’m not saying to you give away all your profit here, but sometimes that helps people to pay quicker. It just depends on your business setup and what kind of delays you are facing from your clients. But maybe just by setting the expectation at the beginning of the job when you take that deposit, that will then get rid of the need to offer an early payment discount.

Another area that would really help Tim to get on top of his business and have his time spent where it needs to be spent is to outsource his bookkeeping. So if he outsourced the bookkeeping, he could then have that peace of mind that, OK, my books are being done by a professional, by an expert who knows what they’re doing. I’m going to be able to trust the reports that I get given. I’m going to be able to make those informed financial decisions. And I’m going to be able to just grow my business that way based on those numbers, based on that P &L and that balance sheet that I’m going to get every month.

And then also, you know, here at Abacus is what we do is we’re going to walk you through that P &L and that balance sheet to make sure you understand what those reports are telling you and what looks good, what needs your attention, where maybe there was some overspending the month before and all that, those kinds of things. So we’re going to talk you through, make sure you know what that looks like for your business and what’s going up. So it’s going to free up time for Tim. That’s going to give him that opportunity to focus on his business, make sure that he’s getting his materials for the best prices. 

He’s going to have the time to research that and just be able to focus working on the business rather than in the business all the time as well. And also by outsourcing your bookkeeping to a professional, it’s going to reduce the risk of errors and it’s going to improve your financial accuracy and it’s just going to give you that peace of mind that you need when you’re looking at your reports.

Another option for Tim would be to look at creating a budget and a forecast of future expenses and revenue and seeing what does that look like so that he can then plan for a gradual team expansion. He doesn’t have to hire four people right this second. He can be like, okay, right, I need to hire one person in the next two months. Then I’m gonna look at adding another person two months after that. What does that look like? Looking at the big picture and determining what that future growth looks like. So by knowing your numbers, knowing how much you’re spending right now, what your revenue is right now,

How busy is that keeping Tim just by himself? And how many jobs is he turning down? If he’s turning down a whole bunch of jobs where it could be earning him another 20, 30, $40 ,000 a month in revenue, then does it make sense to hire someone right now? Absolutely. So that’s the big picture. It’s not just a case of like, I’m super busy and I need to hire someone. You want to make sure you have the revenue there to be able to pay that person. So looking at all those numbers that’s going to help you be able to determine what you need to do next, what are your next steps, what’s your cash flow looking like, and are you going to be able to make that happen. 

Another thing that Tim can do is to look at implementing time management strategies. So he needs to go through, if at the moment he’s doing everything, he’s wearing a million different hats, so he needs to determine what tasks should he be doing, what tasks does he need to be delegating. So maybe just buying materials and scheduling jobs.

Maybe that’s something that an admin assistant could help him with. It may not have to be a full -time position, but it might be something that somebody just comes in however many hours a week that would then help free up that time from Tim being able to do that as well so that he can get his evenings back. Yes, we all want to work long hours, but we have to look after our health at the same time. And we don’t want to be going crazy working 16 hours a day, five days a week, and then working weekends as well. So Tim needs to figure out what tasks does he not need to be doing right now.

What can he delegate to somebody else? And then looking at setting clear work boundaries as well to avoid burnout. You don’t want to go through that burnout. It is not fun. It is stressful and it impacts everybody around you as well. And it has a major impact on your business. So make sure you’re taking that time for yourself and to be able to have that time with your family that you’re not working from when you get up to the second you go to bed. Yes, we want to grow our business, but to sacrifice our health at the same time, it’s not worth it.

Look at what other tools that you can use as well. Are you using any project management tools? Are you trying to do everything on paper? Are you using spreadsheets, which are great for some things, not necessarily planning logistics of jobs and that kind of thing. So maybe look at what a project management tool would look like to be able to streamline those operations, improve the efficiency of everything getting done so that you’re not creating the wheel every single time you get another job. So if Tim was able to implement some of these changes or all of them into his business, it’s really going to help him to take his business to the next level. He needs to know his numbers. 

He needs to be able to have that time to work on the business, to be able to grow it, focus on sales. What does that look like? Where does he need to increase his marketing? When does he need to hire? Okay, when he needs to hire, what does he need to get? That’s all the things that Tim’s going to know how to do. And you as the business owner are going to be in the same way. So it’s really important that you’ve got this good time management and that you’ve got your numbers and you’re using those resources to help you grow your business. So I know I probably just completely overwhelmed you with all that information and you’re like, yep, I need to do this. I need to know my numbers. I just don’t have a clue where to start. And so that’s where we are here to help you. So you don’t have to do this alone. We’re here to walk you through this, help you implement the profitability accounting method, help you get your books up to date, help them to be clean and accurate. So that way you can look at reports every month and see exactly how everything is going.

Now you might be sitting there thinking right now, well, I don’t even have my books set up. I’m just running my business through my bank account. That’s okay. We can help you get all of that set up, get all your numbers into QuickBooks so that then we can start running reports as well. So remember, if nothing changes, nothing changes. I will never forget somebody saying that to me years and years ago, that you have to do something different if you want to get a different result. And putting off fixing your business or fixing your cash flow, whatever it might be is not going to just make the problem go away. It’s not going to fix it by itself. 

So if you are just really able to relate to Tim and maybe Steve from last week as well, and that you just feel that, OK, this is me. I need to get some help. Then let’s chat. Let’s jump on a Zoom call. Let’s see if we’re a good fit for you. And if it’s something that we can help you with, see what you have going on. And then next step would be to do a diagnostic review of your files. If you’ve got a QuickBooks file, we would take a look at it and just a fee, one -time fee at $4 .95, we would then go through everything and see what you have going on, what needs to be fixed. 

We would then create a plan for you as to what that looks like. And then we would look at what it would be going forward and keeping them up to date on a month -to -month basis as well. So just like Tim, if you’re in the plumbing business, if you’ve got a leak, you’ve got to get it fixed. You can’t just keep putting it off, putting it off because the leak is not going to fix itself. And it’s the same when it comes to your bookkeeping as well. Things aren’t just going to improve by themselves. Your numbers aren’t going to get better if you keep doing the same old thing that isn’t working. So if we can help you, please reach out to me. 

You can go to constructionprofitfirst.com/call and fill out the information there, get on my calendar and let’s have a conversation and see if we can help you. Thanks for watching Nail the Numbers. We’ll see you next time.