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www. e l e c t r i c a l c o n n e c t i o n . c om . a u
61
BY
BRIAN
SEYMOUR
OVERHEADS
This is basically the money required to
keep your business operating whether
you have any paying work or not.
Electrical contractors’ overheads
generally run between 15% and
25% of total sales, but this can vary
dramatically depending on the type of
work undertaken. To establish the most
realistic percentage for your business it
is wise to consult an accountant.
The overheads for an electrical
contractor include administration and
office expenses, vehicles, telephone and
internet, depreciation, bad debts and
collection expenses, industry subscriptions,
licences, advertising and promotion.
However, there can also be job-
specific overheads, which are incurred
on particular job sites. These may
include travel beyond the usual
radius, hire of specialised equipment,
site storage, accommodation, site
transport, site lifting, site allowances,
and utilities fees and charges. All need
to be included in the final selling price
to maintain profit.
WORKFORCE EXPERTISE
Does your team have the expertise to
complete the job?
As mentioned, the jobs with more risk
– and those that include new technology
– are greater profit makers. If you do not
have the expertise, how much will it cost
to hire or sub-contract this work?
If any new technology is going to
mean regular business, will a training
program be worth the investment in
time and money?
DEGREEOF DIFFICULTY
In sports such as surfing and
gymnastics, higher marks are given
according to the degree of difficulty, and
the same applies in business.
Tasks involving a degree of danger
would reduce the number of rival
tenderers. However, you would need high
levels of expertise to consider submitting
a tender for high-voltage installations,
putting floodlights on a high-rise building,
working 500m underground, or installing
expensive and sensitive equipment in a
multimillion-dollar laboratory.
COMPANYEFFICIENCY
Is your customer base growing each
year, and are you generating repeat
business or continually marketing to
new possibilities?
You will need to identify customers
that generate the most profit and
concentrate your marketing strategies
on them.
Their jobs are usually those for
which your team has the most expertise
and can carry out the work with
maximum efficiency.
UNDERQUOTING
Estimating is fraught with potential
disaster when tender deadlines are
extremely short or when multiple
tenders are due on the same day.
Adding to these difficulties are
11th-hour variations and additions to
the project, very late supplier quotes
and a wide-ranging break-up of prices
and schedule of rates, causing the final
selling price to be calculated too quickly
and resulting in omissions
Another regular mistake in
underquoted tenders is the omission of
prime cost, provisional and contingency
sums; EBA; GST; site allowance; travel;
site accommodation; or failure to include
sub-contract prices.
These mistakes can cause prospective
customers to lose faith in your company.
A good, well thought out selling price
assessment sheet will flag up these
specified sums and service costs, acting
as a double check to ensure you don’t
omit them from the final selling price.
CUSTOMERRELATIONS.
The customer is the person who pays
your wages, therefore ‘no customer, no job’.
A profitable company maintains good
customer interaction and provides an
outcome with a quality consistent with
the customer’s requirements.
The old adage ‘the customer is always
right’ is only partly true. The customer
may know what the desired outcome
should be, but in many cases will have
no idea how to arrive at it.
This is where the electrical contractor
becomes an advisor, to work with the
customer to provide the highest-quality
installation for the price.
Profitable tenders are often won
due to the electrical contractor
offering alternatives that produce a
more aesthetic outcome or a more
efficient installation.
In any market segment there are
electrical contractors who are more
profitable than the rest. They secure
the best jobs, they have an amicable
customer base and they maintain a
dedicated team.
These companies plan their operations
and follow through with the plans.
They have established benchmarks of
excellence that they continually practise,
and it is reflected in their bottom line.
SOME ESSENTIAL TIPS:
>
Tip#1
Pay your suppliers on time –
late deliveries can eat into profits
>
Tip#2
Consider the risk factor – does it
outweigh the opportunity?
>
Tip#3
Monitor cash flow – long
payment periods have a detrimental
effect on profit
>
Tip#4
Do not willingly deceive yourself
by underestimating your overheads
>
Tip#5
If you don’t have the expertise,
consider the most economical way of
acquiring it
>
Tip#6
Identify your profitable
customers and concentrate marketing
strategies to them
>
Tip#7
Use a tender checklist to ensure
all costs are accounted for
>
Tip#8
Remember: no customer, no job
– keep the relationship strong
>
Tip#9
Profit is the lifeblood of the
business