Episode 137 Podcast Transcript

Speaker 1 (00:00):

There’s a lot to be said around the correlation between this time of year and how the rest of the year works. When you get it right, it just sets you up for an epic year on a whole rather than December and January being two shitty months and you’re spending the rest of the year recovering from that period. G’day everyone. Rob Kropp and Dan Stones here from Pravar Group and welcome back to another episode of The Trade Den. Welcome back, Dan. We’re going to be talking about this thing called Christmas and what do we do either side? You ready for it?

Speaker 2 (00:35):

I am. Usually you ask me how I am today. I’m a little bit surprised, almost stunned because we are talking about Christmas. It’s end of the year time and we’re all of a sudden we’re there. It’s sort of like, holy shit, this has come around quick all of a sudden. So no one’s immune to this, I think. But whenever we turn this corner, it always smacks me in the face for some reason, but feeling good otherwise.

Speaker 1 (00:53):

I can’t believe we’re talking about that C word so early leading into Christmas, but what’s mid-October now and can you believe it? It’s like, it’s going to be Christmas before we know it. And you and I are self-confessed grinches, but I think we’re softening as we get older, but I can’t believe we’re talking about Christmas.

Speaker 2 (01:14):

I know. I don’t know if we’re softening, but maybe the people around us are just accepting the fact that we’re not going to change. They’re not coming around to our way, but they’re accepting the fact of how we feel about the whole thing. No, we do look forward to it. I think we always look forward to that time with family. And I think that’s the whole point of today. The instincts we have around it are always going to be there. But when it comes to business, there’s a real job that needs to be done at this time of the year. And if we leave it too late, it’s gone, it’s passed and you don’t get to fix that. And the cost is real. So I think the head down, us up, get busy, get things done for the end of the year to finish strong is right. There’s work to go out, but there’s other things that need to happen along the way.

Speaker 1 (01:58):

There is. And this is the real grinding of the gears, the real balancing act that every business owner has to face because you got to think you’re leading into Christmas. Things are crazy. It’s busy operationally. There’s challenges. You’re trying to finish as strong as you can. You’re probably the most stressed you are. The lead into the end of the year is one of the hardest for any trades business. But the work you don’t do in that period is where it bites really hard in quarter one of the new year. And that’s where this real balancing act kind of comes into play, doesn’t it?

Speaker 2 (02:32):

It really does. And I think it’s hard to stop when everything’s manic. Even customers are manic. They want their jobs done. They want to close out. Your staff want to close out. Someone though has to prevail. The businesses that go into this period and are unorganised, they’re without fail. It’s almost like a law of the trades business world. You will suffer, you will pay the price. No one comes out alive if they forget to start the year and just sort of run to that finish line, as you said in the intro.

Speaker 1 (03:04):

And what I like about this, the reason why this topic is so important and what I like about it the most is that getting this period right is the difference between having a good year and a bad year because it’s a knife’s edge. And if you get it wrong, you can lose a tonne of money over that period, that time where you should be enjoying time with your family and having a great time and having a bit of a breather, it should be an enjoyable time of the year. But what most trades businesses do is they pay for it and it often takes the first three to six months of the year to recover in the new calendar year. And it can just tip a business over the edge what could have been a great 12 month year. Most business owners spend 10 months recovering from two shit months over a December and January period.

(03:50):

And so that’s why this topic is so important. And when I teach this to clients on group calls and we’re getting ready to teach this at a similar time and for our lifestyle clients, my slide says, don’t fuck it up. And I know it’s pretty direct and straight to the point, but for you listening right here, right now, don’t fuck up this period. Don’t get it wrong because if you get it wrong, it can seriously hurt you and you can be high fiving leading into Christmas going, how good is that? We had a good quarter four of the calendar year, but all that gets undone because you have a shit start to the new calendar year and between the two quarters, it washes out as not a great period over that six months. So yeah, this time of the year is so critical in getting right, isn’t it?

Speaker 2 (04:36):

It really is. And the good news is I think once you know this and once you experience it, you’ll always hold it, but it’s getting into doing it and it’s understanding what to do amongst all the business. So the good news is today we’ve got three levers for you. So there’s three levers. Each one that we described today we’re going to go through has the job that you’re doing in Q4 in this part of the year before the end of the year and the payoff that comes on the back end of it because without knowing what the payoff is, you’re probably going to weigh it up and go, well, in the grand scheme, is it really worth it? But that’s what we’re going to be covering off. The three levers themselves are pipeline, cash and resources. Those are the three levers that we’re going to focus on today.

(05:15):

You get these right, January becomes a start and you’re not scrambling when you come back trying to play catch up for not just one month, but as you said, two, three, even four sometimes if you’re really looking at it from a cash perspective. But let’s start with part one, which is pipeline. And the thing I think here is you need to be selling into the quarter that you’re not in now. You’ve got to start thinking ahead. And Q4 is a real big one where people neglect pipeline because I’m flat out already. I don’t need more work. The last thing I feel like is more work, but that’s the thing you’ve got to get over. You’ve got to start to really start to focus on that next for Q1.

Speaker 1 (05:54):

Yeah. This is the weird part of the year where come to the end of the year, it’s almost like everyone’s held off doing jobs, but everyone wants it done before Christmas because they’ve got friends, family coming over. It’s almost like the deadline in society creates a natural sales deadline for a lot of trades business owners. So the beauty is that in the lead up into late October, November, December, there’s an increase in natural demand. We’ve come out of winter, we’re into spring, we’re coming into summer, we’re coming to that Christmas period. People are naturally spending more money in society because it’s naturally that time of year. So now is that opportunity in your business to capitalise on when people are in that spending period. That’s the important part as a business that you’ve got to capitalise when people are naturally spending money around this crazy time of the year of Christmas.

(06:52):

So right now in business, it’s important that you’re not only selling into finish the year strong where you’re turning highly probable work into actual secured work because that helps with resourcing we’ll talk about in a minute, but you’ve also got to be looking beyond the Christmas period and start selling into the new year so you know you’ve got work coming back to. So this time of the year it’s a real balancing act from a pipeline and sales point of view yeah?

Speaker 2 (07:21):

It really is. And I think let’s really define clearly what we mean. You mentioned two things there. One was highly probable, the other one’s secure. And I think let’s make sure we’re clear on what this is because it’s easy to fool yourself that you’re doing this work in Q4. I’ve got good things lined up, the prospects are there, I’ll get back to them. And those are the probable jobs, but probable jobs tend to drift when things are busy around you. You don’t chase them up, you don’t follow up for a resolution. The customer goes quite because they’re working on their busy stuff. As you said, Christmas comes around. It’s real easy to lose sight of those probable jobs and they go from being not from probable to secure, but from probable to cold. And that’s what we’re really trying to avoid. But if we get that wrong in our understanding of probable and secure, that’s where we start to trip ourselves up to begin with.

Speaker 1 (08:10):

Correct. And from a sales point of view, you almost use Christmas as your excuse to be able to go, let’s get contracts signed, let’s get deposit paid, let’s get dates locked in. In sales, you’ve got to create urgency in the sales process. And so we can naturally use Christmas to either lock it in beforehand or push it into the new year and use that time of the period to be able to take it from highly probable into secured, like you said. And secured means locked in, not a verbal, let’s do it. It’s like secured, contract signed, deposits paid, date agreed on and start times. And that’s the important level you got to get to in sales, isn’t it? Not just, “Hey, well let’s have a conversation around it and yeah, let’s move ahead.” It’s got to be, we’re in the bag, let’s go kind of thing.

Speaker 2 (09:00):

Yeah. Things like, “Oh, it’s looking like it could be busy in January. It feels like I spoke to a couple of people already. They’re looking to get going early in the new year.” None of that screams to me even probable, let alone secured. So please don’t bank on that. You’ve got to go back and you’ve got to really start to follow up in a methodical way to get the formalised part of this done because that’s the gate that you need to cross before you hit the end of the year.

Speaker 1 (09:24):

And what I like about the lead into Christmas is you can create urgency around that like we were talking about before, because if you’re starting to be really clear on capacity planning around what you can get done into Christmas, you can create urgency in your sales conversations there. But then the beauty around that is because you are selling heavy into the end of the year, then you’ve got the ability to be able to go, “Bang, we’re full. No more.” Then you can start filling into the new year and then things start pushing into January, start pushing into February. And before you know it, you’ve got a whole month or more work ready to go from when you start the year. It’s like happy days. How good is this? We started the new year, we’ve had a great finish to the end of the year, but now it’s starting stronger because we know we’ve got work coming back to.

(10:12):

And that’s when we see this, don’t we, Dan, that when clients finish strong and have a good pipeline of work, sometimes over the break and into the new year period, that’s when they have cracking results from a calendar year and a financial year, financial results yeah?

Speaker 2 (10:29):

It does. And it all flows on from there. So you got to think, and this is why we say this, because if you think about your own business and how long it takes to close a job, win a job, get to the contracts, get all that stuff done that we just talked about, you close that, I don’t know, let’s say it’s mid-November and you get that agreement, that job’s going to start January. That’s what you’re looking for. That’s the feeling you should have. There is a next, there is a January, there is a start time. If you do nothing and you sell nothing at that point or you’re still fluffing around, you’re going to come back to fluffing around. You’re going to be playing catch up. You’ll be selling from day one in January. And the knock ons from that, the slumps that you see early in the year, they started October, November, December, not January when we came back and oh, it’s a bit quiet.

(11:11):

People are still away. No, that’s an excuse. You didn’t do the work in Q4.

Speaker 1 (11:16):

Especially for those businesses, those trades businesses who are more in the B2B game. B2C is a little bit different because something breaks today, you get the phone call, you’re booking the job next week. You really don’t have a pipeline for a B2C business. Majority of the clients we deal with are B2B more project style businesses. And this is what in sales called gestation period, what you’re talking around there. And this is the thing is it’s operationally busy in October, November, December, but you’ve got to sell in October, November, December to be operationally busy in January, February, March. And this is where the conflict in the mind and the priorities happen for a lot of trades business owners because when you are operationally busy, you’re not thinking around selling, but you’re not necessarily selling to be busy now. You’re selling into the future to be busy.

(12:11):

And this is where so many people do fuck it up because they don’t sell hard enough for future quarters. They come back in the new year and it’s all over. You have a really bad start of the year. So if you have bad starts to the year every new year, it’s because what you didn’t do in the lead up to Christmas, which caused that period to be rough in the new year.

Speaker 2 (12:33):

Yeah. And if it sounds like we’re repeating ourselves, we are deliberately. We can’t get this strong enough across to you that pipeline in Q4 matters. So please heed that part one of the conversation today. The next thing we’re going to talk about now is part two of cash and you not being a bank, but the knock on of all of this starts with that first phase. So that’s why we repeat it so often. But part two in terms of cash, in Q4, you’ve also got this sense of, well, I’ve got to have my ducks in a row because making sure you’ve got liquidity, making sure you can get through the break, making sure you can set up for jobs in the new year well, you can make sure you’re starting clean with cash is another thing that gets underrated or pushed to the end as the busy or crazy period is going on.

Speaker 1 (13:21):

Yeah. The reality is that come mid-December, if you’re not getting paid before mid-ish December, good luck. It’s flowing over into the new year. And the hard part around this time of the year is it’s end of quarter leading into October, November, December quarter. You’ve got annual leave over that period. It is non-billable time, but all your overheads still have to get paid. And then come the end of January, but BAS is due, your monthly superannuation now is due and all. Sorry, weekly superannuation now is now due because of all the changes. But in that period, you’ve got all your obligations stacking up in the new year. And if you don’t get paid in a timely manner before Christmas, it’s going to create a huge cash flow problem in the new year. And that’s why you’ve got to get invoicing and variations out the door and approvals and cash in the bank before in the lead up to Christmas so that it doesn’t become a cash flow pressure over the break when you want to be spending time with your family.

Speaker 2 (14:21):

Yeah, absolutely. And I think in a B2B landscape especially, Christmas time is holidays. Admin time is a holiday time at the start of the year. People aren’t rushing to come back to pay bills. So you will pay that price. It’s not going to be, oh, we did the work in December. We’ve got to wait a few weeks. It’s a little bit longer. It turns into February, March and the other obligations that kick in. We see this lasting all the way out. The ripples of this particular thing with cash, it really takes till June, I would say, in my experience to say that you will recover your cash position. It takes a good two quarters to do that if you really do fuck it up.

Speaker 1 (14:59):

Yeah. And I’ll correct myself from before what I was talking around super. I think now that we are onto the super payments where you’ve got to pay it in the same timing as you do wages with the changes of the rules, that’s going to add, especially for this is the first time that this is the first Christmas where these new rules have come into play, where a lot of business owners used to do is they probably spent the super money as working capital and they probably spent their BAS money just to keep the business afloat over that period. And then that first payment in end of January, start of February is when they’re scratching around for bas and super payment. But this is the first year where those rules have changes where the payday super has to be paid weekly. You don’t have that luxury of almost borrowing that money where you’re robbing Peter to pay Paul to be able to keep the business afloat.

(15:52):

You’re going to have to be paying super and wages and everything during that period. So there’s going to be more pressure on businesses cash flow this Christmas probably than prior because the super payments and everything have to go out in a more timely manner. So I wanted to correct that from before, but you’re right. The timing of the essence is super important in the leading up to Christmas. You got to be invoicing regularly. You got to do more progress claims. You got to get it signed off, get approvals, get confirmation when people are going to be paying you. So that lead up into October, November, early December is super critical to be all over invoicing and debtor management from that period.

Speaker 2 (16:33):

Yeah. And it’s almost a little part 2B of all the first two steps we’ve talked about, but getting jobs finished rather than stretching yourself so thin and doing bits and pieces of some and trying to do your best effort for, I’ll get to this one, I’ll get to that one. The knock on of that is you never get to bill for the jobs that are half finished. You’ve got to get them completed. So getting any jobs in a B2C especially, you don’t want to be in that position where hey, we’ll come back and we’ll just finish it off in the new year. We’re going to run out of time. That’s just a cash flow crisis waiting to happen if you do that.

Speaker 1 (17:06):

Correct. Now in January, business owners have got to come back and be on the phone straight away, don’t they? For a lot of people, they’re thinking about kickstarting the year and not necessarily chasing payments, but this is such a critical task in January is chasing payments and people who haven’t paid before Christmas. They’ve got to be all over it, don’t they?

Speaker 2 (17:26):

They do. When I’m coaching this with clients, I’m always talking around, you’ve got to come back to what’s in the best interests of your business and you’ve got to act on behalf of the best interest of your business. It’s like having a kid that’s hungry that you know you’ve sort of been out too long for the day and you’ve got to get them fed. The business has to feed. It’s going to be struggling. It’s going to be screaming. It’s going to be hurting if you don’t. So don’t think that you can just sort of push that aside and play the overly nice guy sort of card and sort of work in with everyone else because you don’t want to rock the boat. You’ve got a hungry child sitting there going, “Feed me. I haven’t eaten for a while. We need to get this thing sorted.”

Speaker 1 (18:03):

That’s why we say that you run a business, not a bank. And that’s the prime example, isn’t it? The business has to be fed and cash is the oxygen to feeding that. And you got to be all over those debtors early and you got to have those conversations like, mate, you promised it before Christmas. Where is it? How come you haven’t paid yet?

Speaker 2 (18:20):

Yep. You have to be on it. All right. Now let’s talk through the third thing that comes with all of this. And hopefully you’re starting to see the overlap between the selling to the cash. Now when you do this, the third thing that kicks in is resourcing. And this is about getting to a point where you’ve done the work so that you know you’re ready and you can deliver on what you’ve promised in Q4. So you don’t want to over promise, but selling into Q1 is going to mean nothing if you’ve got no one to do the work. You’re just going to run into a different set of problems when it comes to getting the work done and starting to do the work. So resourcing is a huge one that we always say, make sure you’re paying attention to this rather than just sort of pushing it down the road and kicking the can down the road to that first week back when you’re like, holy shit, where is everyone?

Speaker 1 (19:03):

Yeah, let’s split between again, between Q4, finishing strong, Q1 starting stronger. And for me, when it comes to Q4, you’ve got to know your capacity limits in the lead up into Christmas because demand’s going to be higher and people are going to be wanting to throw last minute jobs onto you. And this is where you can get caught out with unrealistic expectations. So you’ve got to know your capacity limits to be able to go, well, here’s the limit for the crew size that we’ve got. You can then start planning out, well, what labour are we going to need? What materials are we going to need? What equipment high are we going to need? Let’s start ordering materials so we’ve got it available before Christmas. If you want to, you can start looking for subcontractors and stuff to give you a bit of a chop out, but you got to be really careful in the lead up to Christmas that it’s just not a really high revenue month, but all your margins being deteriorated because you’re just throwing overtime labour to be able to get the jobs done.

(20:05):

And I’ve seen that so many times where guys are like, I’ve had my best quarter ever, but we made no money because they just labour stack jobs and overspent on everything. So it’s a real balancing act and knowing your limits also then knows how you can sell into Christmas. So you’re almost creating that pipeline back to stage one, isn’t it?

Speaker 2 (20:26):

It really is. And that’s why we said you’ve got to get from probable to secured. You’re not going to start booking in, like you said, you’re not going to start putting in supplier orders, you’re not going to start putting in against subcontractors and things like that if you’re unsure if the work’s going to go ahead. You’re going to be forced into a position where you’re going to be in that catch 22 and you end up blowing out on labour or you end up paying overs for deliveries and things like that. So understanding your commitments from the sales you made is a really key point. And then having the cash to get ready for that with your resources is obviously where this all comes from. So it’s really important, I think, Rob, that this isn’t like an hour or just sort of let’s have a think about this on the drive to the next job while I’m crashing through the Q4.

(21:12):

This is a proper planning phase and a session, probably multiple sessions where you’re sitting down to really map this out over time. It’s not a knee jerk or just a, yeah, we’ve had to think about it. It’s a real map that you need to have.

Speaker 1 (21:26):

Correct, then all three tie together, pipeline, cash, resources, because pipeline determines the resources you need, the resources, then you get in there from a scheduling and planning point of view. And then you’ve got to be able to work out, well, how are we going to manage our cash flow to be able to pay for materials and pay for deposits and pay for labour and pay for extra subbies if we need to? And so they’re all connected, these three, and hopefully you’re starting to see that. But you’re right, especially when you’re then starting to plan the new year, it’s about sitting down. Well then going, well, when are we open? When can we get on job sites? When could we start? Let’s schedule labour now. Let’s pre-order materials now because you need materials available to start. There’s no point having labour sitting around with no materials to instal as well.

(22:13):

So there’s a whole planning that has to get done in the lead up to Christmas, but then there’s a whole planning that needs to be done, especially for the first week or two. So you’ve got the ability to hit the ground running and crack on with it in January rather than kind of coming back and going, all right boys, what are we doing today kind of thing. You got to be pre-planned and well organised when you do hit the ground in January.

Speaker 2 (22:36):

Yeah. I want to make that point. Securing your people is one thing and it still surprised me when clients like, I didn’t know so-and-so was going to be off or they’re not back until next week and then they’re in a hole and that sort of thing. It does happen. So secure your people, know what leave’s being taken, know who’s around on the 12th, know who’s coming back after, in our case, Australia Day or the end of Jan, whatever it is, have that locked in. And same for subbies as well. So make sure you’re securing your people. The other one is lead times on materials. Suppliers are shutting down. They will shut the doors and suppliers are typically better at managing cash. They’re not going to let stuff out the door without being paid in this instance a lot of times. So they’re in pretty good shape.

(23:14):

So they shut down and you will not find suppliers. So making sure you’ve got materials and lead times on deliveries and all that stuff locked away is another one that is grossly mistreated. Guys fuck this one up all the time too.

Speaker 1 (23:27):

They do. And they come back and they’ve got the guys ready to crack on, but they don’t have the materials ready to instal. And so especially when it’s custom stuff, it’s different if you go into your electrical supply or your plumbing supplies business or whatever it is, but it’s your ability to make sure you’ve got what you need to be able to get on with it so that you can keep moving and maximise the billable time before Christmas and maximise the billable time in the first week or two of the new calendar year.

Speaker 2 (23:57):

Nice. Now that’s our three. So we’ve covered them off. We’ve talked about the cost of not doing it, how you do it in Q4. Just wrap for us if you can, Rob, just the payoff of what does a January look like when it’s done well in the context of just those three things and the payoff. Just let’s pretend it’s first week of Jan, off we go.

Speaker 1 (24:18):

I think we’ve got to remember that when you get this right, January turns into a, let’s say a three week billing month over a four week period of the month. And you’ve got to remember that when you understand the breakevens of a business, for a lot of businesses, they’ve got to work. You don’t start making profit until you get to the end of the month anyway, because the margin that you make in the first couple of weeks of the month pays for all the overheads and the margin of delivering the job. And then in the last few days of the month, it’s like, right, we’re in profit territory kind of thing. And so this is where a lot of businesses actually break even or actually lose money over December and January is because if you take a two week shutdown period like a hard shut, you’re literally losing your profit.

(25:11):

That’s your week of profit that the business can make. And that’s why a lot of businesses make losses over December and January, even though it’s the craziest time of the year. And so the more organised, the more planned and prepared you are, you’re mitigating the downside of losses in your business. That’s what you’re doing. You’re setting yourself up to either have a breakeven month in December and January, or at best have a bit of profit because you’ve planned well. And if you can do this period right, you’re not then trying to recover in February and March for the shit start that you’ve had in January because you didn’t do the work in December and November. So there’s a real knock on effect over this period if you don’t get it right.

Speaker 2 (25:55):

Yeah. And I think this is the thing, the pattern you run now where it’s the chaos into the famine in Jan, you’re replacing that with a new pattern. And I think that’s the key that we want to sort of hit on here is replace the pattern with a healthy pattern. So if you’re sick of running the way you have for year on year on year and suffering and losses in Jan and this sort of thing, this is the pattern to break. This is the thing that you can do. And the pattern we’ve just gone through on those three principles, those areas are the pattern that replaces it. So there’s a real. In a sense, it’s not as hard as it sounds. You’ve just got to get the discipline around it and find yourself in the right spot to be reminded of it and then follow through on it.

(26:36):

So I think there’s a real benefit to, especially in the coaching that we do at this time of year, to help people break this pattern and really get them to understand the benefits of doing this.

Speaker 1 (26:46):

Correct. And across all our programmes, we teach this same topic every single year across the board of all our programmes because the more you do it, the better you get, the more you do it, the more lessons you learn from prior years to be able to go, “Oh, I missed that in pipeline. Great. I’ll fix that next year. Oh, I missed that in cash. I’ll fix that next year. Oh, I missed that in my resourcing. I’ll fix that next year.” I think the clients that we coach over a long period of time as they come through our programmes, they keep hearing it. There’s a lot to be said around repetition and the better they get at it and they keep learning lessons and eventually after a few years down the line in coaching, they nail a Christmas and they go, “How good is that? I’ve nailed it because I’ve learned from previous Christmases.

(27:32):

I’ve broken the back of the patterns, the old patterns that I’ve been in, created new patterns, new patterns have created this amazing result.” It’s like, bang. Quarter four calendar year, amazing one. We made profit. Quarter one, we nailed it. We made profit. Bang, the whole year’s been a ripper. So there’s a lot to be said around the correlation between this time of year and how the rest of the year works. When you get it right, it just sets you up for an epic year on a whole rather than December and January being two shitty months and you’re spending the rest of the year recovering from that period.

Speaker 2 (28:06):

Yeah, absolutely.

Speaker 1 (28:08):

What a great call. I know we’ve covered a lot of ground today, haven’t we, Dan? But we’ve jammed so much into this period, this conversation, but it’s so important to get this right, isn’t it?

Speaker 2 (28:19):

It is, and it has been a four month conversation when you think about it. October, November, December into January, even went into February. So we’ve covered a lot of time, but you don’t get that time back. It literally will be. It’ll go from November to February before you know it, and there’s nothing you can do in between to right the ship.

Speaker 1 (28:37):

If you’re in that space where there is a pattern that’s emerged over the years in your business and you want to break that pattern and get it right this Christmas and you’re determined to get it right, then jump across to strategysession.com.au, book in a time that suits you, and let’s have a good conversation around breaking that pattern, put the right strategies in place, and let’s make this your best Christmas, New Year’s period that you’ve ever had in business. Thanks for tuning in today and looking forward to coming back to you with another episode here on The Trade Den. Until then, take care.

Speaker 2 (29:06):

Catch you soon.