11 years trading, now failing, why?

[SteveWu]

My father began fencing in 1995. I started working for him as his first employee when I was 17 in 1998.
I continued to work for him, learning the trade and ultimately how to manage the business up to 2005 (so 7 years).
Everything from being on the tools, customer services, book keeping and management (8 employees at the time).

Since 2005 I have been running the business with many ups and downs. We survived the recession but we stopped using employees in 2006 in favour of using Sub-Contractors in an effort to reduce over heads (pay wages for jobs done rather than salary).

However, there has been an on going problem where-by I have been introducing my own savings to the business every year (sometimes up to 5 times per year), to keep the business going.

Turnover has increased year on year, reaching £150k in the last financial year.
Yet my net profit (still a sole trader) has only ever peaked at 30k, with an average of 25k being used for a recent mortgage application.
I've minimised all unnecessary over heads, and even all my sub contractors have now left to do their own work.

I am left on my own, on the tools and running the business. I pay my other half to maintain the books and work as a secretary. Mostly to alleviate time pressure having been working all the tools all day everyday.

Despite this, my business has made an increasing 5 month loss and shows no signs of recovering.
I pay myself the bare minimum to cover my house and bills. And have nothing in the way of luxury to show for the work I put in.

I've attempted minor price increases (5%) and instantly priced out of the market with many customers letting us know we're too expensive.
There's plenty of work out there. There always has been for the past 18 years that I can remember.
But I cannot find any skilled workers who are reliable enough to pay to do the work. They either want more than the job is worth or don't want it at all!

My father ran the business in a different era. With employees who didn't grumble about their wages. Where job prices were well in excess of costs.
But the market has changed.

Even after 11 years of trying, and even with many customers, I fail to see how this business can make any real profit/growth.
The profit margins are too small (if any). And workload is too much for one man alone. Hiring a book keeping has alleviated some of that time but subsequently increased costs.

There are 0 business running costs to minimise. That's no exaggeration.
I already operate on paying myself less than £400 per week.
Which covers my mortgage and bills. I can't even afford a car, I have to use my van as a daily driver!

Surely it's time to call it a day?

 

[JEREMY HAWKE]

Hello Steve it nice to see a proper business on here
Its time to call it a day when someone else from the outside has looked over your business properly and looked in from the outside and they may see what you dont see

You have hit the nail on the head it is not like the good ol days and I promised myself all my life I would not resort to using that term but you are right ! We all made money easily in the old days .
The sad thing is like a lot of proper business here we may have to accept that this is all it is going to be for a while .
Sometimes an aggressive price rise that you maybe reluctant to impose could do the trick you might have less customers but make more profit

A FENCE COMPANY "POSTING" ON HERE . MAYBE YOU COULD LEND THE MODS YOUR "POST" REMOVAL TOOL THEY WOULD LOVE THAT

 

[UKSBD]

You say you can't find any skilled workers.

How many skilled workers do you need to put up a fence?

How often is the skilled worker loading the wagon, carrying the tools, fetching materials from suppliers, carrying materials, fixing the rails, digging the holes, tidying up, etc.

I know what you mean about things being different though.
I was on the building for 25 years, 1st 10 or so with old generation guys everyone was happy.

Then a few younger subbies were used, only needs one or 2 gobby ones,
"I'm earning this", "I made this much last week", "on sitework you will double your wages", "the labourers at ??? are earning twice as much", "brickies are on £200 a day at ???" atmosphere soon changes, glad I got out

 

[ADW]

How about apprenticeship schemes for initial help. Low cost and you can start training a youngster the way you need.

Targeting more niche and specialised fencing or additional services introduced. Find a usp if possible, a way to add value so it is not always about cost to the client. Being smaller against some of the bigger contractors makes you more adaptable.

Hard to give specific ideas without knowing more detailed information really.

 

[DavidWH]

Are you quoting like for like against the cheaper competitors?

If you're charging along the same lines as the competition, are they using the same quality materials?

I don't know about fencing, but our industry sticky back plastic can range from less £1 a metre, to £20+.

Can you offer a warranty on your work?
Can you supply it quicker than the competition?
If industrial/security fencing could you offer servicing & repairs?
Could you expand into installing gates?

 

[STDFR33]

Are you actually making a loss? Because you say the business pays you less than £400pw.

At £150,000, you are, or should be VAT registered. Is it worthwhile trading under the VAT threshold?

You shouldn’t be making losses on jobs. If materials and overheads are not covered by the price on the job, then you need to quote a higher price or not take the job on.

An apprentice might be an option. It would enable you to focus on the technical aspects of the job, and they can take away some of the mundane tasks whilst they eventually learn their trade.

Despite what you say, there is always opportunities to cut down on costs. A fresh set of eyes is sometimes what it needs.

 

[The Byre]

Despite what you say, there is always opportunities to cut down on costs. A fresh set of eyes is sometimes what it needs.

This!

As the man said, there is no reason to be making a loss on a job. Are you buying the posts, wire, etc., at the lowest possible price? Are you as mechanised and automated as possible to cut down on labour costs? Have you stripped out all the dead-wood of unnecessary or avoidable costs?

For example, I have a neighbour who runs one of those Timberjack Harvesters and a portable sawmill that charges about one-third of what the usual wholesalers want - and much of his stuff in native larch, which is many times better than the Christmas tree rubbish coming from Sweden and Norway.

There are three basic ways to offer a product or service -

1. Cheaper
2. Better
3. Specialist

Perhaps somewhere in the history of your company, you have fallen between those three; i.e. you are not the cheapest, but you are not the best either and you do not offer specialist fences for specific applications?

With farm incomes and similar activities coming under increasing pressure, cheaper is always popular. But then there is always someone out there who will demand the best. And then there are all the folks who want specialist fencing for things like horses, festival grounds, temporary fences and fences that have to be built very quickly.

Round our way, the guys still putting in fences by hand, have lost out to the mechanised boys with hydraulic augers and post drivers, usually mounted on a tractor and with the fence and wire rolls incorporated. Nobody wants to pay the hourly rate for two guys with shovels and 'Monkey Wrenches'!

 

[JamieM]

How much are you paying your wife?

Would she be working elsewhere if she wasn't doing your books?

 

[KatiePrice123]

Have you looked at sourcing cheaper materials?

 

[Gecko001]

The problem in my view is that you are sub-contracting out the work. This works in some businesses but you have to ask yourself the question, if others are actually doing the work, what value am I adding to the business of actually getting a fence put up for a customer. You are perhaps supplying the materials and looking after the financial side of things which is quite a lot, but to a customer it is perhaps not all that much as what is to stop the customer from buying the materials and just hiring a sub-contractor directly? the subby might not even be VAT registered and thus not have to charge VAT for his labour and thus be able to uncut your prices.

 

[Paul Kelly ICHYB]

Put your prices up 10% and when you are told you are too expensive, reduce it by 5-8% (not 10 - too obvious)!

What is different in your actual business - less quoting, less jobs, more expensive materials. Identify where the core issues are and attack each of them!

Start working smarter, not harder!

Where is your website? Are you on social media (personally or business)? Have you stayed in contact with your old customers? Do you market the vicinity whenever you do a job?

So much could be done and it need not cost a lot and hopefully deliver some good returns!

 

[fisicx]

Why are you using subcontractors? The bloke who fixed my fence just had a labourer to do all the grunt work. He was always busy but only needed to do 4 days a week. He earns enough to pay the bills so doesn't see any point in working more hours than he needs to.

 

[ffox]

There are 0 business running costs to minimise. That's no exaggeration.

Last financial year you turned over 150K. That's around 3K per week.
Your pay maxed out at 30K. That's around £600 per week with ENHI.
You run a van - say £100 per week including fuel.
You have a bookkeeper, but you don't say what her pay is.

If there are no other overheads that leaves in excess of 2K per week to pay for materials and premises. That is unless you have a yard full of expensive leased equipment and a heavy advertising budget.

There must be something here you haven't said.

 

[JamieM]

The problem in my view is that you are sub-contracting out the work.

Why are you using subcontractors? The bloke who fixed my fence just had a labourer to do all the grunt work. He was always busy but only needed to do 4 days a week. He earns enough to pay the bills so doesn't see any point in working more hours than he needs to.

He isn't using sub contractors.

I've minimised all unnecessary over heads, and even all my sub contractors have now left to do their own work.

I am left on my own, on the tools and running the business. I pay my other half to maintain the books and work as a secretary. Mostly to alleviate time pressure having been working all the tools all day everyday.

 

[Vectis]

You have a turnover of £150k and a nett profit of £25k - £30k? I don't know what margins you expect in fencing, but is that so bad?

You're paying your bills, mortgage etc but have to put money back in sometimes - surely this is a cashflow issue (buying in materials for example, I presume) as you say you have zero running costs. Do you charge upfront for work, or are you out of pocket initially when purchasing materials?

Don't you consider paying your wife a salary a 'business running cost'? Is there a cheaper alternative which would let your wife work elsewhere and bring in an additional wage?

But, at the end of the day, if you're really fed up with it then sometimes it's best to call it a day. How would you feel about working for someone else, as a sub contractor maybe, as you say there's lots of work around?

 

[Gecko001]

He isn't using sub contractors.

I see that. He has stopped using sub-contractors and now on his own. Maybe it is what I would call "the 60 minute make-over effect". What I mean by that is that people expect any job to be done quickly these days and obviously the OP will not be able to do a fencing job as quickly as if he had a labourer working for him. Also there are some jobs where working on your own actually means that you work less efficiently and do not save costs but actually add costs to doing the job.