Case study
Jeff, a young plumber, married with three children, came to see me in June 2003 about setting up his own business. He wanted our help to run the business through our business coaching sessions. His fear was that he would lose everything if the business failed and he knew nothing about being in business.

I advised Jeff that we would help him structure his business so that it limited any damage if the business failed. But I also told him that the best way to make sure the business didn’t fail was
to attend to the small things daily.

The things I advised him to do were:
• make sure there will be a profit in each job before starting it
• don’t be slack in invoicing
• make sure you get paid on time and if not, stop the work
• pay your suppliers on time and finally
• put aside, for ‘a rainy day’, 10 per cent to 30 per cent of each job’s profit in a separate bank account for uncertainty.

The business went very well and Jeff won a number of big jobs and made handsome profits. Over four years he was able to build up a sizeable cash reserve. Business was going so well that Jeff decided to drop the business coaching sessions.

Early in December ‘08 Jeff called me. He heard a whisper that the developer he was contracted to was going into receivership, what should he do?
“How much does he owe you?” I asked.
“Around $100,000,” he replied.
“What do you mean ‘around’ – what does he exactly owe you?” I asked.
“Don’t know I haven’t invoiced him for a while,” Jeff said.
“What’s a while?” I asked. “Two months?”
Jeff said. Silence.
Jeff was owed over $250,000 and he hadn’t taken wages for six weeks. He had a difficult Christmas. Happily, his reserve allowed him to pay his suppliers and continue his business.

The developer had in excess of $10 million in debts and no assets.

The lesson learnt here is that it does not matter whether you are a big or small business, pay attention to the small things, you just never know when adversity can hit.
Peter O’Leary, Sydney West