*Editors Note, sometimes I feel the need to add my own experiences into guest pieces written and this is one I feel quite strongly about. If you ever decide to take that monumental leap into founding your own plumbing firm I cannot stress enough how important it is to have an advisory board. It can be your accountant, your lawyer, a successful friend in business or friendly competitor, etc. However, it must be people completely impartial to your feelings. Family members and employees are difficult to include because they each have their own agenda. A family member may want to spare their father/mother, father-in-law, uncle or whomever bad news, an employee may be fearful for their job. However you come up with it, do it and do it now. It is life or death for a company, believe me I know first hand.
Your Plumbing Business Needs and Board of Advisors ASAP
This Article Will Focus on how and why your plumbing business needs a Board of Advisors to help mentor and guide your Plumbing Company to achieve more and greater success.
A Board Of Advisors Is Not A Board of Directors In Fact They Are Entirely Different
Large Enterprise Level Plumbing Contractors normally have a Board of Directors that oversees parts of the operations and management with in most cases the authority to change management structure as they see fit. They are tasked with the developing and monitoring the Strategic Objectives of the company. They provide insights from a very high level top down view because they possess specific skills in Production Accounting and Marketing (PAM) as it relates to companies with $10M+ in annual sales and 50+ employees.
Plumbing Contractors With One To Twenty Employees and annual sales from startup to $10M can benefit by having access to Five Key People that are their Board of Advisors at a fraction of the cost and not give up any control of their Plumbing Company. The value the Five Key People on your Board of Advisors brings are insights from the best practices they see first-hand being used in the most profitable and successful Plumbing Contractors in your market similar in size and operation to your Plumbing Contractor firm.
Follow This Step-By-Step Process:
#1 Get A Commercial Banker You Can Work With
Go visit your bank and ask to speak with one of the commercial bankers on staff. Every bank has at least one and they can be one of your most powerful allies and mentors. The good news is they are on the bank’s payroll, not yours.
Tell them you are working with a construction accountant that is helping you with the construction bookkeeping and accounting and that you have a totally separate firm who prepares your Annual Federal Tax Return. We can help with your construction accounting needs.
Bankers like to know you are using tried and true method of “Trust But Verify” to help limit fraud and errors. We recommend having completely separate accounting firms. You need an accounting firm that specializes in construction accounting for your bookkeeping services and a different accounting firm preparing your Annual Federal Tax Return. This is one of the best ways to keep checks and balances in your system. In addition if you need to replace one or the other it will be a lot simpler.
Plan on meeting with your commercial banker monthly, quarterly, semi-annual basis whatever works for both of you. Before going to meet with your commercial banker print and bring two copies of your Profit & Loss and Balance Sheet for the year-to-date so you both can review them together. Always, always keep your commercial banker updated about any major changes that may affect your business or personal finances. NEVER, NEVER, EVER SURPRISE YOUR BANKER!
Ask your banker these questions:
1. Is there anything on the financial reports I should be paying close attention too?
2. How can you and the bank help me run my business more profitably?
3. Who is your target customer and how can I refer more of them to you?
No matter what size your Plumbing Company is now, whether you need a loan or line of credit or not, you need to understand that lending money is only part of what banks offer to help Plumbing Contractors like you succeed. Lots of people need Plumbing services and some of them will ask their banker for referrals. It is important that you are the one they refer.
Do not catch the dreaded disease I call “Yellow Fever”. This Randalism occurs when Caterpillar, the world’s leading manufacturer of construction equipment begins to promote their brand new shiny yellow colored backhoe and other heavy equipment with all the latest whistles, bells and gadgets.
My advice is “Wait for it….” and let your commercial banker know if you are interested in some new equipment, keep developing the relationship and wait for the “ring, ring”! You could get THE CALL…
“Hi Plumbing Contractor Frank… how is your business doing? Hey we haven’t met for a while and I was wondering if we could meet at your office for coffee because we are about to REPO a piece of heavy equipment that you may be interested in. I reviewed the latest Profit & Loss and Balance Sheet you gave me with my supervisor at the bank and they thought we may be able to work something out if you are interested…”
Banks hate storing equipment! They would rather it went from the repo man’s storage yard to your storage ASAP! In most cases the commercial banker with offer very reasonable and fair price and terms so it is important to remember this Randalism “The Pig Gets Fed, The Hog Gets Slaughtered!” Negotiate a fair deal that allows the bank to get something and you get something, make it a win-win and you will find more great deals coming your way in the future. Get greedy one time and you will lose a lot of money in the future.
#2 Your QuickBooks Expert / Xero Accounting Online Construction Accountant
Subcontract the bookkeeping to a qualified construction bookkeeping and accounting firm that specializes in construction accounting and outsource as much of your construction bookkeeping, payroll processing, complex invoicing and monthly and quarterly tax reports as you can afford. It will free up time to do what you do best and the books will be kept in order.
Choose someone that specializes in your industry because the days of the one-size-fits-all accounting practice has gone the way of the dinosaurs. This is the one place not to try and save money. Trying to save money on your construction bookkeeping services is worse than buying day-old sushi at the gas station for half price!
Make certain they are using the most current technology which means they have equipment in a secure server farm that allows you remote access to your QuickBooks desktop version in the cloud or Xero Accounting Online, whichever one you are using. You do not want the QuickBooks Online because you need to see the same QuickBooks software you have on your desktop now. The only difference is you have remote access anywhere you have internet connection and your construction bookkeeper can get to it from their office. No construction bookkeeping service needs to ever be in your office unless you invite them.
Your outsourced accountant needs to provide an easy way to get the paperwork to them 24/7/365 with fax, scanning, email, and in person. Make certain they are in an office building, not their home. A more professional environment attracts a better class of professional bookkeepers. And the building needs to have a secure lock box that allows you to drop paperwork off 24/7/365 when it is convenient for you, not just during business hours.
Obviously scanning all your paperwork into a paperless secured server and link source documents to the transactions in QuickBooks for easy retrieval later is a given. This makes it easy for you to get to it remotely, see it, print it or email it without having to dig through a file cabinet or pile of papers.
Finally they need to be available to meet with in person to discuss how your business is doing. And they need to be able to explain in easy to understand language what your Financial Statements, Profit & Loss and Balance Sheet mean.
#3 Your Income Tax Return Preparer
If your bookkeeping is solid you can use any qualified tax preparer to fill in the blanks and generate the return. I used to believe only a C.P.A. could fill out a tax return. Now with the advances in technology and properly setup QuickBooks I no longer feel you need a C.P.A. for this.
#4 Your Commercial Attorney
If you own and operate a business you absolutely positively need a commercial attorney to:
- Setup your business entity, LLC, Inc. or whatever is best
- Review contracts you will ask your customers to sign
- Review contracts you will be asked to sign
- Keep you out of trouble wherever possible
- Keep you out of litigation if at all possible
- Setup your partnership agreements
Two kinds of contractors: ones who have a commercial attorney and ones who will get a one after having locked horns with somebody else’s commercial attorney. A good commercial attorney will draw up employment agreements, construction contracts, review insurance policies and more. A qualified commercial attorney is worth every dime they charge.
#5 Your Financial Planner
Eventually you will want to leave your business and pursue other interests so plan ahead now. You could start with Quicken software and play around with it. You can learn a lot about investing and run some scenarios that will show you how much income you will need to retire and develop an action plan.
Once you have some basic knowledge get a Certified Financial Planner. If you do not have a lot of money to ask your commercial banker to recommend someone at the bank and eventually when your reserves build up get a Certified Financial Planner.
That’s all I have for now and if you have read this far please do me the honor of commenting and rating this article. Tell me what you liked, didn’t like, tell it like you see it because your feedback is crucial and I thank you in advance.
As we are near the end of 2013 it is a good time to reflect on something Ralph Waldo Emerson wrote in his essay titled – Compensation. It relates to what I have said many times “The Universe is always in balance”.
“There is a third silent party to all our bargains. The nature and soul of things takes on itself the guaranty of the fulfilment of every contract, so that honest service cannot come to loss. If you serve an ungrateful master, serve him the more. Put God in your debt. Every stroke shall be repaid. The longer the payment is withholden, the better for you; for compound interest on compound interest is the rate and usage of this exchequer. – Ralph Waldo Emerson
I leave you with this heartfelt blessing “Be-Do-Have. Stay the course and always remember you have answered a calling to Be the best Plumbing Contractor you can be. Do your best works all the time, even when you are deep in the crawlspace and think nobody will ever see it. Knowing in an ancient wise way the Universe always rewards those who go the extra mile and you will HAVE the respect, love and kindness of your brothers and sisters who are also following the path of Be-Do-Have”.
Randal L. DeHart, PMP, QPA