I received an email from a builder announcing they were shutting down for an entire month over the Christmas holidays.
I almost fell off my chair.
Do you know how much a month-long shutdown is costing a building company?
I’m not saying you can’t take a holiday. In fact, that’s highly encouraged. But you absolutely must keep the lights on over this time period and keep the business running.
This year, more than ever, given the turmoil builders have experienced in 2023, the allure of an extended shutdown over Christmas is understandably tempting.
However, what many builders fail to realise is the significant impact this decision can have on their profitability, not just in the immediate future but throughout the upcoming year.
Understanding the Impact of Extended Shutdowns
Your fixed expense ratio - the proportion of fixed expenses to revenue - becomes critically unbalanced when you shut down operations.
While fixed expenses, such as office rent, salaries, and loan repayments, remain constant, the absence of cash in-flows during a shutdown period causes this ratio to skew, directly impacting your net profit margins.
This is more than just a temporary dip; it's a financial ripple effect that can disrupt a building company’s financial health for months to come.
Builders returning to work in late January will find themselves "chasing their tail," trying to recoup lost time and profit.
This scramble doesn't just affect January; it spills over into February and March, disrupting the entire first quarter. The first quarter is critical – it sets the tone for the year's performance.
But the impact extends beyond profitability. During the shutdown, new inquiries – the lifeblood of future business – often go unanswered. Or most certainly run cold because you take weeks to get back to them!
Your investment in advertising and marketing throughout 2023 becomes wasted when leads you’ve been warming up for months all of a sudden go straight to your competition.
Another ripple is a pause in construction which results in delayed progress invoices. Yet your supplier invoices from pre-shutdown still need settling, straining your cash flow.
Taking a Break Without The Cost
So what can you do to take a break without stressing about the financial health of your building company?
The key is to implement systems that allow your company to function even when you’re not around. With the right systems, you can confidently delegate responsibilities to your team and automate tasks with technology.
If your business systems are not robust enough so that you can take an extended break, then that needs to be a core focus for 2024. You could even spend the holiday season to work ON your business and begin documenting key systems and processes so you are in a better position next year to take time off.
Building a company that can sustain an extended break without compromising its operations is a milestone that demands dedication and strategic planning. It won’t happen overnight.
Brian Tracy, a renowned motivational speaker, once bluntly stated, "The price of success must be paid in full, in advance."
Either prepare your business to thrive in your absence or risk facing severe financial consequences.
A festive shutdown isn't just a break; it's a test of your building company’s resilience. Choosing to take an extended break without adequate preparation is like steering your ship into a storm without a compass.
The Next Move Is Yours
If your building company can’t keep operating while you take a break, it’s a sign that you need to make some changes. You need to have an honest conversation with yourself, roll up your sleeves, and start implementing systems that can sustain your business in the long term. Not only in its current form but when you grow in the years to come.
Don’t just build houses, build a company that you are proud of which will deliver sustainable growth, profit, and the ability to take a holiday once in a while.
If you’re not sure where to start, book a call with a construction industry expert to identify what you need to do next from the button below.