Time to expand your team?

You’re busy as. You don’t have the manpower to handle the current workload. Lead time is stretching out. And the work keeps coming.

Many tradies find it hard to say ‘no’ to customers. Or feel they can’t knock back jobs as it will impact growth. So, they end up working longer and longer hours. 

Is the answer to expand and try to do more? Or stick it out and do as much as you can with the team you’ve got?

You may have been down this road before. You may have taken on extra staff, or seen others do it, and been worse off. You don’t want to repeat those mistakes. And isn’t there a downturn coming? It’s hard to predict. 

That’s why I’d recommend building your war chest while things are good. Create a cash cushion and increase efficiency now, so you can easily adapt - whatever happens next.

If you’re getting geared up to take as much work as you can, great. Nothing worse than feeling like you’re missing out on opportunities.

Want to know how you can tell if it’s likely to work out well? It depends on your own situation.

ASK YOURSELF THESE QUESTIONS: 

1. How many months of confirmed work do you have right now?
2. Are clients prepared to wait or are you losing jobs through long wait times?
3. How much money could you make off increasing your capacity? 

1. Is the work profitable or is it work that has a low margin?

Being busy doesn’t mean you’re profitable. You might make more money by picking and choosing the best jobs and turning the others away. When taking on more work and a bigger crew, ensure there are margins in the jobs. Otherwise, it’s just endless stress and bad cashflow. Also, assess whether the work best suits you or if it’s slowing you up. If jobs are taking longer than they should, that’s affecting your margin too.

Do you see where I’m going with this? Let me say it straight: 
The real answer is in your numbers, not in your workload.

You’re in business to make money. So, business decisions should (mostly) be based on the numbers. Numbers make things very black and white, so you can make smarter decisions.

2. Can you make money off another worker?

Consider how much it would cost you, and what you would need to get back.

Here’s a rough guide: If you pay your new tradie on the tools $65,000 per year ($1,250 per week), then billable hours (not including materials) for them needs to be around 2-3 times that (ie $2,500 - $3,750 per week).

To get a more exact picture we’d also look at overhead costs and gross margins.*

Generally, if you get this right, you can aim to make $40,000-$80,000+ off each of your employees on the tools, depending on your trade. If you can't afford to put on another full-timer, it’s likely your rates are too low, especially if you have minimal overheads.*

3. Does cashflow support it?

There’ll be an initial dip in your bank account for at least a month or two, while you get them up to speed plus pay their wages (before you can bill for the work they’re putting out and get that money back). Look for any subsidies to help with initial costs.

The trick is to do a simple cashflow forecast to see what’s going to be in your bank account over the next few months. Then you can make sure cashflow won’t be stretched too far.

Warning: Many tradies have lost the ability to pay their staff when customers haven’t paid. Ensure you have robust systems for minimising late/bad payers.

4. What if you get a bad apple?

This can happen. It will cost you money. It’s a risk.

What can you do? You’ve got to bite the bullet. Invest in finding the right person. Play at 100%. Advertise the job well. Do due diligence. Interview well. Check references properly. 

Get the right help, not just ‘help’.

Make sure you include a 90-day trial in their employment contract. (If you have less than 20 staff). During this time, you want to watch them closely on the job and, check in regularly.

Test and push them a bit, to see how they respond, to see if they’ll be a good long-term employee.

Remember that quality staff requires a quality leader. Train your crew properly. Give them structure. Build team culture. Grow the business this way and it will pay huge dividends down the track.

5. What happens if work dries up?

Finding a steady supply of the most profitable work takes effort.

Hiring will free you up to hunt for more work. Put the time in and you’ll find it. You can’t grow a business with a scarcity mindset.

Overwhelmed with work only some of the time? Make the decision to grow or stay small. You can’t have it both ways. Sure - you don’t want to pay someone to do nothing. But in this environment, you'll only be slow if you allow yourself to be.

In the meantime, you’ll find things for them to do: Use your downtime to train them. Get them into the office quoting, get them cleaning the van, filling it up, ask them to go get this or that.

Know your worst-case scenario numbers. How long could you go with no work for them? With a 90-day trial, you can always let them go if you don’t have the work. Not ideal but keep it in mind.

More things to check:

How will the new hire fit into the current team? You don’t want to upset the apple cart.

Can you speed up the office? A bookkeeper or office manager may be far more efficient than you.

Someone with experience costs more and gets more done. Someone who needs training costs less. Both can work. Return takes longer if someone is less skilled.

Would a foreman to manage the team be a better option than an extra pair of hands on the tools? 

Does anyone need to get off the bus first? An existing crew member with a bad attitude creates ripples seen and unseen. That’s something you need to take care of right away.

What if there’s no shortage of work, but a massive shortage of skilled workers? What if you just can’t find good, qualified people?

Well, quality people are employed somewhere. A few may be looking for change. Do it right, and you can become the employer they desire. More on that another time.

If you’re busy, more workers will help. After all, there’s a limit to how much work your current team can get out, even if you improve your productivity.

Conversely, more staff and more work won’t make your life easier unless the numbers stack up. Employees should make you money.

If increasing your team makes sense - then go for it.