I just saw another fantastic business get into trouble
I’ve seen this pattern too often recently, so I had to share it with you.
I’m not saying this is you…
This is a cautionary tale:
Here is how it goes – look out for the signs and don’t fall into this death spiral
- Business is good and grows
- Success – making money generating cash – happy days
- The owner gets distracted (and a bit too confident – I’ve been there, done that)
- Hires “pros” to help run the business and trusts them too much
- Pros build their kingdoms
- Overhead Bloat sets in
- The business keeps winning work, but margins are dropping
- Loads up with debt – buying cool stuff like trucks, plant, and equipment – banks are throwing money at them.
- Estimates are not built up from a cost base – costs rise – it turns out the jobs they’ve won are not profitable.
- They lose track of costs and job profitability.
- The owner puts in some more money cause the business is good, right? (it was – but maybe not now)
- A bad couple of months come (as they do)
- The proverbial hits the fan
- Cash Flow crunch
How do you avoid it?
- Relentless Cost Control
- Persistent Marketing
- Development of People
- Tight Financial Reporting
- 12 Month Rolling Forecast
Here’s my rant
If you’re using the Profit Planner Forecast Template you will see trouble coming before it happens.