Business planning for trades businesses
30 March 2023
On the 18th and 19th of November last year Findex was fortunate to attend the New Zealand Certified Builders (NZCB) conference in Hamilton.
In addition to presenting to members on “Knowing Your Numbers and Cashflow Forecasting” we also had a stall at the conference. This provided us with an excellent opportunity to engage with members in relation to the issues they are currently facing.
Many of these have been well publicised, in relation to supply chain issues, rising costs and labour shortages, and although anecdotal evidence suggests the supply chain issues are starting to wane, as the RBNZ continues to implement measures in the form of increasing the OCR to tackle (same argue with a sledgehammer) NZ’s inflation problem, 2023 is likely to be a challenging year for those in the building and construction industry.
To gain a greater insight into some of the issues facing the industry, we asked members who visited our stall to complete our short Business Risk Survey. This survey asked a series of questions and highlighted the areas the business may wish to focus their attention.
The questions touched on a number of aspects such as Business Planning, Time Management, Cashflow, Risk Identification, Financial Reporting, Quoting/Tendering and Asset Protection.
Of the 10 questions, the number one risk area for members was in relation to Business Planning. 66% of respondents answered “no” to having a written business plan. This is particularly concerning as we enter 2023, with the majority of economists warning that NZ is heading for a recession.
A business plan is an important document for successful businesses that defines business objectives, goals and forecasts. It is a useful tool to help your business set the right course of action so your goals and targets can be achieved, and it can help support your case when approaching banks for financing.
When preparing a business plan, it is important to ensure that your goals are realistic, that these are clear and focused on what you want to achieve and simple and easy to understand. A business plan also mustn’t be something that you prepare, that then sits under the seat of the Ute never to be looked at again. To succeed at reaching your goals a business plan needs to be a living document that is reviewed regularly and adapted as and when industry regulation or economic environment changes occur.
A good business plan will also include the following elements:
The products and services: describe what the business does, how it will develop, any competition and competitive advantages. Remember it is unlikely that you will be able to do everything for everyone, so be very clear on what where you will focus.
Market positioning: Who are your customers and your competitors, and how will your products be promoted and priced?
Operational details: Provide details of where your business will be based, who your suppliers are, and what equipment and staffing will be required.
Financial details: Include a summary of your business forecasts and budgets for at least two years, and past financial results (if available).
The prospects: Outline your short- and long-term objectives as the owner and define the financial outcomes you expect to deliver.
SWOT analysis: Undertake an assessment of your business’ strengths, weaknesses, opportunities, and any threats that could prevent its success.
Pleasingly, the number one area respondents indicated they had under control was in relation to asset protection with 80% of respondents answering “yes” to their personal, family and business assets being protected in the event of an unforeseen event.
For more information and advice your business, whether you’re just starting out or refreshing your plan, contact the Accounting and Business Advisory team at Findex, or find and advisor in your region.