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60 E L EC TR I C AL CONNEC T I ON
AU T UMN 20 1 6
SOUNDS LIKE A PLAN
B
usy electrical contractors
doing their estimates and
administration on the run
seldom think logically about the
profitable outcome.
Here is a definition of profit according
to Investopedia:
A financial benefit that is realised when
the amount of revenue gained from a
business activity exceeds the expenses,
costs and taxes needed to sustain the
activity. Any profit that is gained goes to
the business owners, who may or may
not decide to spend it on the business.
Therefore profit is more than the
figures on the balance sheet, it is the
lifeblood that keeps the organisation
in business and protects the owners
from bankruptcy.
Contracting is a gambling business – the
bid is made and the risk is taken that the
job will follow the anticipated schedule.
So many risk factors come into play
even in the most basic installations:
weather; availability of labour, tools
and equipment; accidents; strikes;
availability and delivery of materials;
and access to work areas all affect the
bottom line.
And a greater profit usually equates to
greater risk.
These are just the everyday hazards
that can affect your job. Other areas
that have a significant bearing on
profitability are outlined below.
TIME
Time is a vital element in maximising
profit, and it’s the hardest to assess.
Any tradesperson worth their salt
should be able to list the materials
required for a specified job. However,
when it comes to labour, the
estimator must take into account the
aforementioned variable risks, which all
affect labour time.
Most projects that go belly-up financially
do so because of labour overrun triggered
by many of these factors.
FINANCING
Do you have enough money to finance
the project?
Many contractors believe that this
is not a problem, because of progress
payments, and their exposure is
minimum. But even working with a
customer who pays on time, there is
a delay between lodgement of the
progress claim and the payment.
Most construction contracts have
a payment clause stating that the
monthly claim must be lodged by a
certain date and it will be paid 21 days
from receipt of claim. So, from the
beginning of the month until payment,
seven weeks will elapse during which
you must fund the project.
If you have to go into bank overdraft
or borrow money for this funding it will
eat into your profit. Even with small
service jobs, if you allow your customer
credit by sending an invoice after leaving
the job, you will be funding this account
until you receive payment.
I always advise new contractors to
take a leaf out of the appliance servicing
industry and demand payment at the
end of the job – in cash or EFT – because
every unpaid day has an effect on your
expected profit.
Also, be sure to pay your suppliers on
time. Poor payers get poor service and
this will have an effect on your jobs if
you cannot get materials when required
to meet deadlines.
FOCUSING ON THE BASIC SKILLS
NEEDED IN AN ELECTRICAL
CONTRACTING BUSINESS,
BRIAN
SEYMOUR
TELLS HOW TO
MANAGE THE PLANNING AND
ACHIEVE A PROFIT.
ESTIMATING