The £9.99 investment that could save your business

In the face of an increasing demand for builders, it's confusing to think that the UK construction industry recorded the highest number of insolvencies in the 12 months leading up to April 2023. Furthermore, 35% of our members who left the Federation of Master Builders over the last two years cited financial difficulties as the primary reason. This raises a critical question: How can skilled tradespeople effectively manage their businesses to ensure profitability and financial stability?

A builder’s story

Last week, I had a conversation with our member, Nik Nelberg of Earl & Calam Design & Build Ltd that provided some valuable insights into this issue. His story was one of honesty, resilience, and a willingness to learn. He shared his journey, marked by failing businesses, financial stress, and personal struggles. However, he also shared his path to recovery and growth, which was largely influenced by a book: "Markup & Profit: A Contractor's Guide " by Michael C. Stone.

The book, as he described, is a comprehensive guide to running a profitable construction business. It provides practical tools such as spreadsheets to help builders understand their numbers, calculate overheads, determine a reasonable salary for themselves, and most importantly, figure out the correct markup to ensure profitability. The book emphasises the importance of tracking actual costs and adjusting promptly if the markup is not being achieved.

What to charge consumers is a common conundrum. Stone contends that your markup is completely unique to your business; you cannot do what others do and expect success, and it shouldn’t be calculated for you by a quantity surveyor.

The role of ego in business management

What stood out in our conversation was Nik's emphasis on the role of ego in business management. For years, he believed that his business was different and that he could figure things out on his own. This mindset, he admitted, was a significant barrier to learning and growth. It was only when he managed to set his ego aside that he was able to embrace the principles outlined in Stone's book and start making significant changes in his business.

His story is a powerful reminder that being a good builder is not just about the quality of the physical structures we create. It's also about the strength of the businesses we build. It's about understanding our numbers, pricing our work properly, and ensuring that we are making a profit. It's about learning from our mistakes and being willing to adjust our strategies when necessary.

Building more than just structures

I was humbled by Nik's honesty and his eagerness for me to share the book with our other members. I believe that his story, and the lessons he has learned from Michael C. Stone's book, can provide valuable insights for our members. Nik has already recommended this book to other members and their feedback includes the words ‘revolutionary’, ‘clear as day’ and ‘a bible’.

The path to profitability and stability

It's not just about reading the right books. We are here to provide resources that can help you navigate these challenges. Our recent webinar Pricing and Estimating for Profit, available now on our website, dives into accurate pricing and estimating strategies.

Additionally, the FMB concluded a pilot coaching course last week, featuring a vital section on pricing, that was met with phenomenal feedback. So, I urge you to get on the waiting list for the next cohort. This could be a significant step towards maintaining a profitable business.

In an industry where financial difficulties are a significant concern, it's crucial that we equip ourselves with the right knowledge and tools to manage our businesses effectively. Let’s remember that profitability and financial stability are not just about the demand for our services. They are also about how well we manage our businesses, understand our numbers, and price our work.